Responsibility Accounting for Profit Centers

Responsibility Accounting for Profit Centers -...

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Unformatted text preview: RESPONSIBILITY ACCOUNTING FOR PROFIT CENTERS To evaluate the performance of a profit center manager, upper management needs detailed information about both controllable revenues and controllable costs. The operating revenues earned by a profit center, such as sales, are controllable by the manager. All variable costs (and expenses) incurred by the center are also controllable by the manager because they vary with sales. However, to determine the controllability of fixed costs, it is necessary to distinguish between direct and indirect fixed costs . Direct and Indirect Fixed Costs A profit center may have both direct and indirect fixed costs. Direct fixed costs relate specifically to one center and are incurred for the sole benefit of that center. Examples of such costs include the salaries established by the profit center manager for supervisory personnel and the cost of a...
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

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Responsibility Accounting for Profit Centers -...

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