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ACCA Applied Knowledge · Management Accounting · Monitoring performance and reporting

Which of the following is the best reason for restricting a manager's performance report to controllable items only?

Reports limited to controllable items hold managers accountable only for what they can influence. This is fairer and more motivating. It does not change total company profit, replace budgets or alter whether costs are fixed or variable.

  1. AIt ensures the manager is held accountable only for items they can influence, supporting motivation and fairnessCorrect
  2. BIt increases total reported profit for the organisation
  3. CIt removes the need for budgets in the responsibility centre
  4. DIt allows fixed costs to be treated as variable costs

Explanation

Controllability principle: managers should be judged on what they can influence, which supports fair appraisal and motivation. Excluding items does not change organisational profit, remove the need for budgets, or alter cost behaviour.

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