Answer as true (T) or false (F). If the answer is false, change the statement to

Question

Answer as true (T) or false (F). If the answer is false, change the statement to make it true.

1.______Managers should be held responsible only for what they can control.

2.______Revenue center managers are responsible for generating revenues within their areas of the organization.

3.______One advantage of decentralization is to allow the development of managerial expertise.

4.______The part of the organization for which managers are responsible is called a responsibility center.

5.______Common fixed costs and direct fixed costs both are typically incurred at a higher level of the organization and are therefore outside the segment manager’s control.

Explanation / Answer

1. Managers should be held responsible only for what they control. - True

Controllability principle in Managerial Performance and Responsibility Accounting is the notion that a manager should be evaluated based on what he or she controls.

The effect is insignificant in case of top-level managers.

2. True

Revenue Center - Organization's segment responsible for generating revenue. The manager does not possess control over investment in assets or costs. Other responsibility centers are cost center, investment, and, profit center.

3. True

Operational responsibilities and decision-making are delegated to managers.

4. True

A responsibility center is a segment of an organization classified by decision-making authority and scope of responsibility.

5. True

Direct fixed costs and common fixed costs are typically incurred at a higher level of the organization.

A fixed cost for one segment of the organization may be a common fixed cost for each of the departments.

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