The decision-making authority assigned to managers within the different responsibility centers (cost, profit and investment) will differ based on the type of center because the role of management’s responsibilities also differs. Therefore, the accounting information required for planning, control, and performance evaluation differs according to the nature of these responsibilities. In 400-600 words address the following: Distinguish among a cost center, a profit center, and an investment center. Provide an example of each for a multi-hospital corporation. What are some of the uses that management may make of accounting information about individual responsibility centers of the business?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The decision-making authority assigned to managers within the different responsibility centers (cost, profit and investment) will differ based on the type of center because the role of management’s responsibilities also differs. Therefore, the accounting information required for planning, control, and performance evaluation differs according to the nature of these responsibilities.
In 400-600 words address the following:
- Distinguish among a cost center, a profit center, and an investment center. Provide an example of each for a multi-hospital corporation.
- What are some of the uses that management may make of accounting information about individual responsibility centers of the business?
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