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CMA Final · Cost and Management Audit · Management Reporting Issues and Analysis

Which of the following is the primary purpose of a management report prepared under a responsibility accounting system?

Under responsibility accounting, reports show each manager's results only for items they can control. This links performance evaluation to authority and accountability, instead of charging managers with arbitrary allocations of common costs or company-wide profit they cannot influence.

  1. ATo report results of each manager only for items they can controlCorrect
  2. BTo allocate all common corporate costs equally to every manager
  3. CTo report only the profit of the whole company
  4. DTo satisfy income tax assessment requirements

Explanation

Responsibility accounting traces revenues and costs to the manager who can influence them, so reports separate controllable from non-controllable items. Allocating all common costs equally would hold managers accountable for items beyond their control.

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