Managerial Accounting Study Set 6
Quiz 12 :
Performance Evaluation and Decentralization
Decision making involves evaluating and choosing from among the different alternatives available, the best alternative or solution to a given issue or a problem. Decision making is a key role of a manager. The two forms of decision making are:- a. Centralized decision making b. Decentralized decision making In a centralized decision making , decisions are made at the top level of the management and the lower-level managers are responsible to implement the instructions given to them as per the requirement of the decision. Whereas in a decentralized decision making , decision making is delegated to the lower level managers. Lower level managers are given power to make decisions. Here the decision is made and implemented by the lower level managers.
Identify the correct option among the five: The answer is 'a' i: e Decentralization. Decentralization is the delegation of the decision-making authority by the top management to the lower levels of management. When the authority to take decisions is delegated to the lower level managers, quick and timely decision is taken. This increases the accountability and the responsibility of lower level managers.
Decentralization is the delegation of the decision-making authority to the lower levels of management. When the authority to take decisions is delegated to the lower level managers, quick and timely decisions are taken. This increases the accountability and the responsibility of lower level managers. In decentralization there will be coordination between top management and responsibility centers. Responsibility center will implement the decision taken by management. Many of the companies tend towards decentralization because • Collection of information is easy • Coordination exists between top level management and lower levels of management. • It will encourage the lower levels of management as decisions taken by them will be given priority and implemented. • Each level of management will take participation in making and implementing a decision.