ACCA Applied Knowledge · Management Accounting · Monitoring performance and reporting
A divisional manager is assessed only on costs and revenues that she can influence. Which type of responsibility centre is she managing if she controls both costs and revenues but has no authority over capital investment decisions?
She manages a profit centre. A profit centre manager controls both costs and revenues, while an investment centre manager also decides on capital investment. Since she has no authority over investment, the centre is not an investment centre.
- ACost centre
- BRevenue centre
- CProfit centreCorrect
- DInvestment centre
Explanation
A profit centre manager is responsible for both costs and revenues. An investment centre manager additionally controls capital investment decisions, which she lacks, so investment centre is wrong. A cost centre covers costs only.
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