The President of Silicon Company Has Just Returned from a Week

question 50

Essay

The president of Silicon Company has just returned from a week of professional development courses and is very excited that she will not have to change the organization from a centralized structure to a decentralized structure just to have responsibility centres.However, she is somewhat confused about how responsibility centres relate to centralized organizations where a few managers have most of the authority.Required:
Explain how a centralized organization might allow for responsibility centres.

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Definitions:

Depreciation

The purposeful spreading of the financial burden of a physical asset over its active life.

Accumulated Depreciation

The total amount of depreciation expensed over an asset's useful life, reducing its book value on the balance sheet.

Commercial Substance

A concept in accounting that indicates a transaction has caused a significant change in future cash flows.

Trade-In Allowance

The value credited to the purchaser when they trade in a used item towards the purchase of a new item.