Question

The responsibility report of Keith Parker, the manager of one of the divisions of an auto parts manufacturing company, includes profits as well as return on investment and residual income. Keith is most likely the manager of a(n) ________

Answer 1

Answer:

Investment Center

Explanation:

The reason is that cost is divided by using behaviors (Variable cost, fixed cost, stepped fixed cost and Semi-variable cost), control (period cost and product cost), responsiblity (cost centre, revenue centre and investment centre), etc.

The benefit of studying costs under the responsibility criteria is that it helps in finding what value the department is generating to company. Cost centres are the cost incurring centres like production, wharehouse, accounting department, internal audit department, etc. The revenue department is more inclined towards increasing the revenue of the company which is the task of selling and distribution department. Likewise the investment department is the broader name of revenue and cost departments because it considers the revenue coming from an business unit and its associated costs are also considered. This responsibility department is the top management of the company who assesses its performance on this basis.