Cost Accounting – 12^th Edition

Ch 22 Terms

Autonomy– The degree of freedom to make decisions.

Decentralization – The freedom for managers at lower levels of the organization to make decisions.

Dual pricing – Approach to transfer pricing using two separate transfer-pricing methods to price each transfer from one subunit to another.

Dysfunctional decision making– See suboptimal decision making.

Effort – exertion toward achieving a goal.

Goal congruence– Exists when individuals and groups work toward achieving the organization’s goals. Managers working in their own best interest take actions that align with the overall goals of top management.

Incongruent decision making– See suboptimal decision making.

Intermediate product – Product transferred from one subunit to another subunit of an organization. This product may either be further worked on by the receiving subunit or sold to an external customer.

Management control system – Means of gathering and using information to aid and coordinate the planning and control decisions throughout an organization and to guide the behavior of its managers and employees.

Motivation – The desire to attain a selected goal (the goal-congruence aspect) combined with the resulting pursuit of that goal (the effort aspect).

Perfectly competitive market – Exists when there is a homogeneous product with buying prices equal to selling prices and no individual buyers or sellers can affect those prices by their own actions.

Suboptimal decision making- Decisions in which the benefit to one subunit is more than offset by the costs or loss of benefits to the organization as a whole. Also called incongruent decision making or dysfunctional decision making.

Transfer price – Price on subunit (department or division) charges for a product or service supplied to another subunit of the same organization.