QUESTION 4 40 po Choose true or false as applicable for each

QUESTION 4 40 po Choose \"true\" or false as applicable for each of the following items as they pertain to responsibility center reporting. In analyzing the operating results of an individual A. TRUE B. FALSE center, it would be most meaningful to deduct common fixed costs in calculating the operating income of the center. - A responsibility center manager could potentially have control over costs, revenues, and/or assets invested Responsibility center operating income includes the impact of controllable variable cost:s Residual income is used in the numerator to compute asset turnover in a ROI analysis. Inventory would typically be EXCLUDED as part of assets invested the ROl calculation. Residual income is equal to the difference between total revenues and operating expenses. C-t) when using residual income as a measure of performance, it is not meaningul to compare the residual incomes of divisions of different sizes. The use of return on investment (ROI) as a performance measure could potentially lead a responsibility center manager to accept a project that might be unfavorable for the company as a whole.

Solution

1. True: common fixed expenses are basic operating expenses

2. False: it is a profit center

3. True: the operating income of centre includes the impact of controllable variable cost.

4. False: net sales is used as a numerator for asset turnover