Dave is the manager of the Software Sales Department. At the end of the year his department’s income statement revealed his direct costs were over budget by $25,000. The Director of Operations, Dave’s boss, asks Dave to explain why he let the direct costs exceed budget. Which of the following is Dave’s best response?

 Companies are easier to manager if they are divided into _____ units.
 
multiple choice
smaller Correct
larger
equal-sized

Explanation
Companies are easier to manager if they are divided into smaller units, called divisions, segments or departments.

 A center that generates revenues and incurs costs, but is not responsible for investments in operating assets, is referred to as a ___________center.
 
multiple choice
revenue
investment
cost
profit Correct

Explanation
 A profit center generates revenues and incurs costs. A cost center incurs costs without directly generating revenues and an investment center generates revenues and incurs costs, and its manager is also responsible for the investments made in its operating assets.

 

A department manager would normally have control of all of the following costs except:
 
multiple choice
department supplies
department employee wages
department manager’s salary Correct
department purchases

Explanation
A department manager would normally have control of all department costs listed except for the department manager’s own salary. 

Dave is the manager of the Software Sales Department. At the end of the year his department’s income statement revealed his direct costs were over budget by $25,000. The Director of Operations, Dave’s boss, asks Dave to explain why he let the direct costs exceed budget. Which of the following is Dave’s best response?
 
multiple choice
Dave should resign, because he is an ineffective manager.
Dave should point out that he is not in control of any of his department's direct costs.
Dave should ask that a responsibility accounting performance report be generated to determine whether the large unfavorable budget variances were within his control before proceeding with the discussion. Correct
Dave should pursue a promotion because direct costs would have been even higher if not for his managerial prowess.

Explanation
Dave should ask that a responsibility accounting performance report be generated to determine if the large unfavorable budget variances were within his control before proceeding with the discussion. A responsibility accounting performance report reports actual expenses that a manager is responsible for and their budgeted amounts.

Thanks