COST ACCOUNTING
RESPONSIBILITY ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
The correct allocation of controllable variable costs
|
|
|
The proper delegation of responsibility and authority
|
|
|
Identification of the management level at which all costs are controllable
|
|
|
A reasonable separation of costs into their fixed and variable components since fixed
|
Detailed explanation-1: -Option (C) The proper delegation of responsibility and authority is the correct answer.
Detailed explanation-2: -The least complex segment or area of responsibility for which are costs are allocated. Cost center mangers have the authority to control the incurrence or non-incurrence of costs, and as such cost centers are the least complex segments for which costs are allocated.
Detailed explanation-3: -The responsibility accounting system is a mechanism by which costs and revenue are accumulated and reported to the top management to make an effective decision. In addition, it gives freedom to individuals to amplify their skills to reduce the cost and increase the organization’s revenue.
Detailed explanation-4: -Planned and Actual Information or Use of Budgeting: Effective responsibility accounting requires both planned and actual financial information. It is not only the historical cost and revenue data but also the planned future data which is essential for the implementation of responsibility accounting system.
Detailed explanation-5: -Business entities exercise the responsibility accounting system to delegate the responsibilities associated with the revenues and costs. The major purpose of a responsibility accounting system is to apply cost control techniques for generating more revenues.