Q3TI - Horngren'S Financial And Managerial Accounting

Question

Match the responsibility center to the correct responsibility report.

Responsibility Centers	Responsibility Reports
14. Cost center	a. Includes flexible budget variances for revenues and costs.
15. Revenue center	b. Includes flexible budget variances for costs.
16. Profit center	c. Includes flexible budget variances and sales volume variances for revenues.

Step-by-Step Solution

Answer

Responsibility Centers	Responsibility Reports
14. Cost center	b
15. Revenue center	a
16. Profit center	c

Step 1: Meaning of Responsibility Centers

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

Step 2: Meaning of cost center

The term cost center indicates the unit of an organization that is responsible for spending the costs or expenses on the products and services. Another important feature of a cost center is that it does not generate revenues.

Step 3: Meaning of revenue center

The term revenue center refers to the unit of an organization responsible for generating revenues. Revenue generation is done by selling goods or services to the customers of the market.

Step 4: Meaning of profit center

The profit center indicates the unit of an organization responsible for earning profits. Such a unit collects the data of revenues and costs and ascertains the variances for profit maximization.