Question

1. Which of the following is not a cost center?

1. An accounting department
2. A Production department
3. A retail sales depot
4. A maintenance department

2. An Investment center is responsible for:

1. Investing in long term assets.
2. Controlling costs.
3. Generating revenues.
4. All of the above.

3. A Profit center is responsible for all of the following except:

1. Investing in long term assets
2. Controlling costs.
3. Generating revenues.
4. All of the above are the responsibility of a profit center.

4. A cost center is responsible for which of the following?

1. Investment in long-term assets.
2. Controlling costs.
3. Generating revenues.
4. All of the above.

5. Use of profit as a performance measure:

1. May lead to overinvestment in assets.
2. Is appropriate for an investment center.
3. Is appropriate as long as profit is calculated using Generally Accepted Accounting Practices.
4. Encourages managers to finance operations with debt rather than equity.

Answer 1

1 ) A cost center is a business unit that is only responsible for the costs that it incurs. The manager of a cost center is not responsible for revenue generation or asset usage. ... Examples of cost centers are as follows: Accounting department.

A Retail sales depot is not a cost centre

Option c is correct answer

2)         An investment center is a center that is responsible for its own revenues, expenses, and assets and manages its own financial statements which are typically a balance sheet and an income statement.

So Investment centre is responsible for all (investing in long term assets, controlling cost, generation Revenue)

So option D is correct

3) In a profit center, the manager is responsible for the revenues generated by the subunit. In addition, they are responsible for the costs and expenses incurred by the subunit in the course of normal business operations. As a result, the manager of a profit center is responsible for the profits of the subunit.

So profit Centre is not responsible for Investing in long term assets

Option A is correct

4)         The main function of a cost center is to track expenses. The manager of a cost center is only responsible for keeping costs in line with budget and does not bear any responsibility regarding revenue or investment decisions. Expense segmentation into cost centers allows for greater control and analysis of total costs

SO a cost center is responsible for controlling Cost

Option B is correct

5)         USE OF Profit as a Performance measure encourages managers to finance operations with debt rather than equity

So option D is correct