Responsibility Accounting
Ford’s executive VP discusses the effect tariffs on steel and other raw materials has on the company’s costs. This video provides a good example of an uncontrollable cost. Further, it shows a manager implying to investors that they should not be held accountable for rises in direct materials costs due to tariffs.
Profit Centers
In this Fox Business video, an analyst explains Ford’s decision to cut sedan production to focus on trucks and SUVs. This clip provides an example of the use of profit centers. After Ford evaluated its product lines as profit centers, the company quickly realized they were losing money on their sedan product lines and were making significantly more on trucks and SUVs.
Investment Centers
This video describes Apple’s reliance on Samsung components for its iPhones. It describes how Samsung is set up into four investment center divisions which include Chips, Displays, Mobile, and Appliances. Because Samsung’s Chips division and Displays division are set up as investment centers, each sells its products to Apple, a competitor to Samsung’s Mobile division. Its Chips division and Displays division are evaluated individually, so they likely have their own incentives to sell to Apple even at the potential determinant of Samsung’s Mobile division.
Nonfinancial Performance Measures
Warren Buffet, often hailed as one of the best financial value investors of all time, discusses reasons why he’ll never sell a single share of Coca-Cola. In this excerpt, Buffet describes many nonfinancial reasons for owning the company including the company’s global expansion and its relentless effort to maintain and improve its brand.
Steve Jobs describes many of the nonfinancial performance measures that can make or break a business. Although from an older interview, many of these same principles still apply today.