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Responsibility Accounting for Cost Centers

Responsibility Accounting for Cost Centers - assumed to...

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RESPONSIBILITY ACCOUNTING FOR COST CENTERS The evaluation of a manager's performance for cost centers is based on his or her ability to meet  budgeted goals for controllable costs.  Responsibility reports for cost centers compare actual  controllable costs with flexible budget data . Illustration  21-21  shows a responsibility report. The report is adapted from the flexible budget report  for Fox Manufacturing Company in Illustration  21-16 . It assumes that the Finishing Department  manager is able to control all manufacturing overhead costs except depreciation, property taxes, and  his own monthly salary of $6,000. The remaining $4,000 ($10,000 - $6,000) of supervision costs are 
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Unformatted text preview: assumed to apply to other supervisory personnel within the Finishing Department, whose salaries are controllable by the manager. Illustration 21-21 Responsibility report for a cost center The report in Illustration 21-21 includes only controllable costs , and no distinction is made between variable and fixed costs. The responsibility report continues the concept of management by exception. In this case, top management may request an explanation of the $1,000 favorable difference in indirect labor and/or the $500 unfavorable difference in indirect materials...
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