Chapter 9 Multiple Choice:
1.It is a subdivision of managerial accounting which relates reporting or performance
directly with the person who has the responsibility for its control. It is useful in assessing
the performance of persons responsible for controlling costs, revenues, or invested
capital and analyzing deviations from planned and prior performance.
a.Accounting systems design and installation
b. Cost accounting
c.Standard cost accounting
d.Responsibility accounting
2.It relates accounting to the budgetary system, thus acting as a control device.
Management reports give details of budgeted and actual performances and show
responsibilities at all levels of management.
a.Programmingc. Responsibility accounting
b.Accounting system d. Budgeting
3.Which of the following statements is correct?
a.The direct cost of a particular department is always a controllable cost.
b.Responsibility accounting identifies cost, revenues and even capital investments with
individuals, e.g., managers, and thus provides for more control and evaluation of
performance.
c.All managers within an organization have equal authority and responsibility
d.Internal reports prepared under the responsibility accounting system should be
limited to only variable manufacturing costs.
4.B Company uses an accounting system that charges costs to the manager who has
been given the authority to make the decisions regarding the incurrence of such costs.
For example, if the Production manager was not able to monitor the efficiency of the
workers in his department, so that he was forced to ask them to work overtime to finish a
specific job on time, the additional cost of working overtime is charged to such Manager
or his department. This type of accounting system is known as
a.Transfer price accountingc. functional accounting
b.Responsibility accountingd. cost accounting
5.In a responsibility accounting system, costs are classified as controllable and non-
controllable costs, which imply that some revenues and costs can be changed through
effective management. Controllable costs can be described as including
a.Discretionary costs only
b.Prime costs only
c.Only those costs that the manager can influence in the current time period
d.All the costs that are directly traceable to the responsibility center
6.The basic purpose of responsibility accounting is
a.Motivationc. authority
b.Variance analysisd. budgeting
Meaning Of Responsibility Centre
A responsibility center is an operational unit or entity within an organization, that is responsible for all the activities and tasks structured for that unit. These centers have their own goal, staffs, objectives, policies and procedures, and financial reports. And are used to balance responsibilities related to expenses incurred, revenue generated, and funds invested to an individual.
In a multinational or large corporation, the organization tasks are divided into a subtask, and each task is given to various small division or groups. In this context, all groups in that organization are responsibility centers.
Related links: What is a responsibility accounting?
Types of Responsibility Centre:
- Cost Centre- A Cost Centre is a department or a unit which supervises, allocates, segregates, and eliminates all sorts of the cost related to a company. The cost center prime work is to check the cost of an organization and to limit the unwanted expenditure the company may acquire. The cost can be the determination of both person and location. In multinational companies, the cost center is authorized to decrease and manage the cost.
- Revenue Centre- This center is accountable for initiating and monitoring revenue. The management does not have any control over the cost or investment but can monitor a few of the expenses in the marketing section. The production of the revenue center is calculated by analyzing the budgeted revenue with actual revenue and actual marketing expenses with budgeted marketing expenses.
- Profit Centre-It is a division or department of a company which operates for the calculation of profit. In an organization, different profit centers are managed by the managers, who identifies profits on the basis of costs and incomes. Profit Centre is accountable for all the actions associated with the sales of goods and production.
- Investment Centre- This center is responsible for both investments and revenue. The investment manager can control expenses, income, the fund invested in assets, etc. He also has the authority to form a credit policy, which has an immediate impact on debt collection.
Also add: What are the functions of management?
The above mentioned is the concept, that is elucidated in detail about ‘Responsibility Centre’ for the Commerce students. To know more, stay tuned to BYJU’S.
Do You Know?
Q1. What is the 4 Ps of Marketing MIx?
Answer: The 4 Ps of Marketing Mix are Product, Price, Place, and Promotion
Q2. Who is known as the father of modern management theory?
Answer: Henry Fayol is the father of modern management theory