Financial and Managerial Accounting

Chapter 24 Budgetary Control and Responsibility Accounting

Learning Objectives

After studying this chapter, you should be able to:

1. Describe the concept of budgetary control.
2. Evaluate the usefulness of static budget reports.
3. Explain the development of flexible budgets and the usefulness of flexible budget reports.
4. Describe the concept of responsibility accounting.
5. Indicate the features of responsibility reports for cost centers.
6. Identify the content of responsibility reports for profit centers.
7. Explain the basis and formula used in evaluating performance in investment centers.

Feature Story

Turning Trash Into Treasure

Vancouver teenager Brian Scudamore needed to raise money to pay his way through college. With $700 and a strong desire to do it on his own, he established a junk removal company. Fifteen years later, 1-800-GOT-JUNK? had 113 franchise partners across Canada and the United States, and projected revenues of more than $60 million.

“It was a high-school business project that was out of control,” says Cameron Herold, vice president of operations.

While the exponential growth of 1-800-GOT-JUNK? may seem unwieldy (at one point it had five consecutive years of 100-percent ...