Xerox Corporation has been an innovator in its responsibility accounting system. In one initiative, management changed the responsibility center orientation of its Logistics and Distribution Department from a cost center to a profit center. The department manages the inventories and provides other logistical services to the company's Business Systems Group. Formerly, the manager of the Logistics and Distribution Department was held accountable for adherence to an operating expense budget. Now the department "sells" its services to the company's other segments, and the departments' manager is evaluated partially on the basis of the department's profit. Xerox Corporation's management feels that the change has been beneficial. The change has resulted in more innovative thinking in the department and has moved decision making down to lower levels in the company.
1. Comment on the new responsibility center designation for the logistics and Distribution Department.
Responsibility center is any department/ unit or set of activities for which manager is responsible. It is important tool of management control system which aid in decentralization. A responsibility accounting system shows the performance of the center under each manager's control.
Thus it focuses on:
Designed to support ...
This explains the concept of Responsibility Centers by taking the case of Xerox