CMA Intermediate · Management Accounting · Responsibility Accounting
Which one of the following is a feature of a cost centre as a type of responsibility centre?
A cost centre manager is accountable only for the costs the centre controls, and its output is not measured in sales terms. Revenue, selling-price decisions and return on investment belong to profit centres or investment centres, not to cost centres.
- AIts manager is held accountable for both revenues and capital employed
- BIts manager is accountable only for the costs it controls, and its output is not measured in sales termsCorrect
- CIts performance is judged by return on investment
- DIts manager decides the selling price of its output in the market
Explanation
A cost centre manager answers only for controllable costs, and there is no revenue measure of output. Accountability for revenue and capital employed belongs to a profit centre or an investment centre, so the other options describe other centre types.
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