ExpertEasy2 marksMultiple Choice
ACCA · Question 05 · The nature, source and purpose of management information
The manager of a regional branch of a retail franchise has the authority to set local selling prices, negotiate with local suppliers for inventory, and manage branch operating expenses. However, the manager cannot authorize the purchase of new store fixtures or expand the store's floor space.
What type of responsibility center is this branch?
The manager of a regional branch of a retail franchise has the authority to set local selling prices, negotiate with local suppliers for inventory, and manage branch operating expenses. However, the manager cannot authorize the purchase of new store fixtures or expand the store's floor space.
What type of responsibility center is this branch?
Answer options:
A.
Cost center
B.
Revenue center
C.
Profit center
D.
Investment center
How to approach this question
Assess what the manager controls: Revenues (yes), Costs (yes), Capital Investment (no). Therefore, it is a profit center.
Full Answer
C.Profit center✓ Correct
A profit center manager is accountable for both revenues and costs, and therefore profit. Because they cannot make capital investment decisions (like buying fixtures), it is not an investment center.
Common mistakes
Assuming it is an investment center because it is a whole branch.
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