Chapter 4 Relevent Costs

Question 1

Which of the following best describes an investment centre?

• A centre for which managers are accountable only for costs
• a centre for which managers are accountable only for financial output in the form of generating sales revenue
• a centre for which manager are accountable for profit
• a centre for which managers are accountable for profit and current and non current assets

Answer 1

• a centre for which managers are accountable for profit and current and non current assets

Question 2

Which of the following is most appropriate measure of performancefor a profit centre ?

• gross profit margin
• revenue minus all costs
• revenue minus all controllable cost
• ROCE

Answer 2

revenue minus all controllable cost

Question 3

Investment centre managers are likely to be most interested in which of the following figures?

• revenue
• profit
• costs
• costs divided by capital investment

Answer 3

• costs divided by capital investment

Question 4

The manager of an investment centre who is being assessed by return on investment must have control over its : (Select all that apply)

• revenue
• fixed operational costs
• variable operational costs
• allocated head office costs
• capital investment costs
• Financing

Answer 4

Revenue
Fixed operational costs
Variable operational costs
Capital investment costs