Is a segment of an organization where the manager controls revenues costs and investments?

Question: 14A segment of an organization is referred to as an investment center if it hasA.Authority to make decisions affecting the major determinants of profit including the powerto choose its markets and sources of supply.B.Authority to make decisions affecting the major determinants of profit including the powerto choose its markets and sources of supply and significant control over the amount ofinvested capital.Answer (B) iscorrect.An investment center is responsible for revenues, expenses, and invested capital. Returnon investment is usually the key performance measure of an investment center.C.Authority to make decisions over the most significant costs of operations including thepower to choose the sources of supply.D.Authority to provide specialized support to other units within the organization.

GLEIM ONLINE 2017 QUESTIONS WITH ANSWERS – UNIT 11Question: 15A company uses a performance reporting system that reflects the company’s decentralization ofdecision making. The departmental performance reports show actual costs incurred during the periodagainst budgeted costs. Any variances from the budget are assigned to the individual departmentmanager who controls the costs. The company is using a type of system called

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A well-designed responsibility accounting system establishes responsibility centerswithin an organization. Managerial performance should be evaluated only on the basis ofthose factors controllable by the manager. Managers may control revenues, costs, and/orinvestment activities. A departmental performance report showing actual costs incurredagainst budgeted costs permits evaluation of a manager and the area for which (s)he isresponsible.D.Activity-based budgeting.

GLEIM ONLINE 2017 QUESTIONS WITH ANSWERS – UNIT 11Question: 16A tech firm uses an accounting system that charges costs to the manager who has the authority tomake decisions incurring the costs. For example, if a sales manager authorizes a rush order thatresults in additional manufacturing costs, these additional costs are charged to the sales manager.This type of accounting system is known as

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GLEIM ONLINE 2017 QUESTIONS WITH ANSWERS – UNIT 11

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A segment is a fairly autonomous unit or division of a company defined according to function or product line. Traditionally, owners have organized their companies along functional lines. The segments or departments organized along functional lines perform a specified function such as marketing, finance, purchasing, production, or shipping. Recently, large companies have tended to organize segments according to product lines such as an electrical products division, shoe department, or food division.

A responsibility center is a segment of an organization for which a particular executive is responsible. There are three types of responsibility centers—expense (or cost) centers, profit centers, and investment centers. In designing a responsibility accounting system, management must examine the characteristics of each segment and the extent of the responsible manager’s authority. Care must be taken to ensure that the basis for evaluating the performance of an expense center, profit center, or investment center matches the characteristics of the segment and the authority of the segment’s manager. The following sections of the chapter discuss the characteristics of each of these centers and the appropriate bases for evaluating the performance of each type.

An expense centeris a responsibility center incurring only expense items and producing no direct revenue from the sale of goods or services. Examples of expense centers are service centers (e.g. the maintenance department or accounting department) or intermediate production facilities that produce parts for assembly into a finished product. Managers of expense centers are held responsible only for specified expense items.

The appropriate goal of an expense center is the long-run minimization of expenses. Short-run minimization of expenses may not be appropriate. For example, a production supervisor could eliminate maintenance costs for a short time, but in the long run, total costs might be higher due to more frequent machine breakdowns.

A profit center is a responsibility center having both revenues and expenses. Because segmental earnings equal segmental revenues minus related expenses, the manager must be able to control both of these categories. The manager must have the authority to control selling price, sales volume, and all reported expense items. To properly evaluate performance, the manager must have authority over all of these measured items. Controllable profits of a segmentresult from deducting the expenses under a manager’s control from revenues under that manager’s control.

Closely related to the profit center concept is an investment center. An investment center is a responsibility center having revenues, expenses, and an appropriate investment base. When a firm evaluates an investment center, it looks at the rate of return it can earn on its investment base.

Typical investment centers are large, autonomous segments of large companies. The centers are often separated from one another by location, types of products, functions, and/or necessary management skills. Segments such as these often seem to be separate companies to an outside observer. But the investment center concept can be applied even in relatively small companies in which the segment managers have control over the revenues, expenses, and assets of their segments.

Is a segment of an organisation whose manager is responsible for both revenues and costs?

When a manager of a department is responsible for costs and revenues Only this is known as?

What are the 4 types of responsibility centers?

Which responsibility center is responsible for revenue expenses and capital investment decision?