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Chapter 24: Q24-7RQ (page 1355)

What is a responsibility center?

Short Answer

Expert verified

Answer

The responsibility center refers to the section or unit of an organization responsible for specific tasks assigned to the same.

Step by step solution

01

Meaning of Organization

The term organization refers to the association of individuals and other bodies who agree to perform particular activities for the accomplishment of common goals specified by the management.

02

Meaning of Responsibility Center

The term responsibility center refers to a unit of anentity or organization responsible for all the events, tasks, and activitiesassociated with such a particular unit. Each responsibility center carries its separate tasks and goals.

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Most popular questions from this chapter

Explain the difference between a lag indicator and a lead indicator.

Question:The accountant for a subunit of Speed Sports Company went on vacation before completing the subunit’s monthly responsibility report. This is as far as she got:

Speed—Subunit X Revenue by Product Actual Results Flexible Budget Variance Flexible Budget Sales Volume Variance Static Budget

Downhill-RI \( 321,000 (a) (b) \) 17,000 F \( 295,000

Downhill-RII 151,000 (c) \) 161,000 (d) 145,000

Cross-EXI 285,000 \( 3,000 U 288,000 (e) 303,000

Cross-EXII 259,000 (f) 255,000 16,500 U 271,500

Snow-LXI 425,000 2,000 F (g) (h) 404,000

Total \) 1,441,000 (i) (j) (k) \( 1,418,500

Requirements

1. Complete the responsibility report for this subunit.

2. Based on the data presented, what type of responsibility center is this subunit?

3. Which items should be investigated if part of management’s decision criteria is to investigate all variances exceeding \)12,000?

Consider the following data, and determine which of the corporate divisions is more profitable. Explain your reasoning.

Domestic International

Operating income \( 10,000,000 \) 11,000,000

Average total assets 24,000,000 32,000,000

Refer to the information in Short Exercise S24-7.

Requirements

1. Compute each division’s asset turnover ratio (round to two decimal places). Interpret your results.

2. Use your answers to Requirement 1, along with the profit margin ratio, to recalculate ROI using the expanded formula. Do your answers agree with the basic ROI in Short Exercise S24-7?

Refer to the information in Short Exercise S24-7. Compute each division’s RI. Interpret your results. Are your results consistent with each division’s ROI?
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