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CSEET · Business Laws and Management · Functions of Management

Consider the statements about functional departmentation: I. It promotes specialisation by grouping similar activities together. II. It makes it easy to fix profit responsibility on each department. Which is correct?

Only statement I is correct. Functional departmentation groups similar activities, which encourages specialisation. Fixing profit responsibility on each department is hard because profit results from all functions together; that ease is associated with product departmentation instead.

  1. AOnly I is correctCorrect
  2. BOnly II is correct
  3. CBoth I and II are correct
  4. DNeither I nor II is correct

Explanation

Functional departmentation groups similar activities such as production, marketing and finance, giving specialisation. However, fixing profit responsibility is difficult because no single function earns profit alone; this is an advantage of product departmentation. So only I is correct.

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