Comparing Forcast
There are three responsible centers relating to performance evaluation of a company. They are cost center, profit center, and investment center. There are several distinguish decision rights between the three responsible party. According to Zimmerman (2010) indicates the performance in a cost center is measure by the manager. The manager of cost center has decision rights to measure the labor, outside services and materials to construct the output (Zimmerman, 2010). Manager evaluates performance in the cost center by comparing the companies actual cost to standard or budgeted costs. A performance of the company is usually measure by a target. In the strategic plan of Anthony’s Orchard Company meet the target is to produce $25 million in revenue by 2015, in order to meet this goal manager must maximize the output for a fixed budget. Manager of cost center also evaluate the cost center base on to minimize cost for predetermine amount of output (Zimmerman,2010).In the Anthony’s Orchard company manager evaluates the direct labor hours worked, materials uses like the apple press and service like pick your own apples.
The second responsible center relating to performance evaluation is profit center. In the profit center the manager decision rights regarding the input mix and pricing and evaluated on profits (Zimmerman, 2010). The manager of profit center evaluates performance by comparing profits and components to budget or prior period (Evaluation, n.d.).Managers are accountable for producing on investment capital.
The third responsible center relating to performance evaluation is investment center. In the investment center the performance measure is actual return on investment, actual residual and actual compared with budgeted ROI or residual income (Zimmerman, 2010). The investment center, manager evaluates the ROI by the product of sales turnover. For example the (Sales /Total Investment) and return on sales (Earning/Sales) (Zimmerman, 2010).