Which of the following is NOT true about a responsibility center?

Which of the following is NOT true about a responsibility center?

ANSWER

INCORRECT

·         

THE CORRECT ANSWER

The manager does not plan or control activities.

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YOU WERE SURE AND INCORRECT

Lower-level managers report to higher-level managers who have broader responsibilities.

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Lower-level managers strive to budget and control costs of a single value-chain function.

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The manager forecasts and directs activities.

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I DON'T KNOW YET

The manager is not in charge of planning and controlling activities is NOT a true statement about a responsibility center. The manager is in charge of planning and controlling activities in a responsibility center. In a responsibility center, lower-level managers budget and control costs of a single value-chain function, lower-level managers report to higher-level managers who have broader responsibilities, and the manager may also forecast and direct activities.

A performance report ________.

ANSWER

INCORRECT

·         

causes operating income to be lower than budgeted

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THE CORRECT ANSWER

compares actual revenues and expenses against budgeted figures

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causes operating income to be higher than budgeted

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YOU WERE SURE AND INCORRECT

is a technique that refers to the concept that a manager will only investigate budget variances that are relatively large

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I DON'T KNOW YET

A performance report compares actual revenues and expenses against budgeted figures.

A favorable variance is one that causes operating income to be higher than budgeted.

An unfavorable variance is one that causes operating income to be lower than budgeted.

Management by exception is the technique that refers to the concept that a manager will only investigate budget variances that are relatively large.

In a profit center ________.

ANSWER

INCORRECT

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managers are responsible for generating sales revenue

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THE CORRECT ANSWER

managers are responsible for both revenues and costs

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managers are responsible for the costs only

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YOU WERE SURE AND INCORRECT

managers generate revenues, control costs, and manage divisional assets

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I DON'T KNOW YET

In a profit center managers are responsible for both revenues and costs.

In a revenue center, managers are responsible for generating sales revenue.

In a cost center, managers are responsible for the costs only.

In an investment center, managers generate revenues, control cost, and manage divisional assets.

Capital turnover ________.

ANSWER

INCORRECT

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focuses on profitability by showing how much operating income a division may earn on every $1 of sales revenue

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THE CORRECT ANSWER

focuses on how efficiently the division uses its assets to generate sales revenue

·         

YOU WERE SURE AND INCORRECT

determines whether the division has created any excess income above and beyond management’s expectations

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measures the amount of income an investment center earns relative to the size of its assets

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I DON'T KNOW YET

Capital turnover focuses on how efficiently the division uses its assets to generate sales revenue.

Sales margin focuses on profitability by showing how much operating income a division may earn on every $1 of sales revenue.

Residual income (RI) determines whether the division has created any excess income above and beyond management’s expectations.

Return on investment (ROI) measures the amount of income an investment center earns relative to the size of its assets.