Cost centers

Short-Answer Questions

  1. What is the fundamental principle of responsibility accounting?
  2. List five important factors that should be considered in designing reports for a responsibility accounting system.
  3. How soon should accounting reports be prepared after the end of the performance measurement period? Explain.
  4. Name and describe three types of responsibility centers and list their main characteristics.
  5. Give five real-world examples of at least two of the types of responsibility centers.
  6. Many organizations limit the number of expense (cost) centers.
    a. List three reasons for wanting to limit cost centers.
    b. List three ideas for eliminating or reducing the size of an existing cost center.
  7. What is the connection between the extent of decentralization and the investment center concept?
  8. Give some of the advantages of decentralization.
  9. Differentiate between a direct cost and an indirect cost of a segment. What happens to these categories if the segments to which they are related are


Sample Solution