Responsibility accounting is a system of accounting that segregates revenue and costs into areas of personal responsibility in order to monitor and assess the performance of each part of an organization.
The main responsibility centers are:
Cost center – the performance of a cost center manager is judged on the extent to which cost targets have been achieved.
Revenue center – Within an organization, this is a centre or activity that earns sales revenue. And whose manager is responsible for the revenue earned but not for the costs incurred.
Profit center – A part of the business whose manager is responsible and accountable for both costs and revenue. The performance of a profit center manager is measured in terms of the profit made by the centre.
Investment center – A profit center with additional responsibilities for investment and possibly also for financing, and whose performance is measured by its return on capital employed (ROCE).
Presentation of information to management
Data and information are usually presented to management in the form of a report.
Format of a report is as follows:
Title of report
The following statements refer to different type of planning within a manufacturing organization:
(1)Operational planning includes the scheduling of work to be done in the short term.
(2)Tactical planning included consideration of ways in which the productivity of the factory workforce could be improved.
(3)Strategic planning includes the setting of the organization’s long term objectives.
Which of the statements are correct?
The following statements relate to business objectives:
(1)The short-term objectives of an organization are described in very general terms.
(2)Corporate objectives relate to the organization as a whole.
(3)It is possible for a division of an organization to have its own specific objectives.
Which of the above are correct?
Solution is C