Which of the following statements best represents the controllability principle?
A)A profit center manager should be evaluated based on residual income,not return on investment.
B)An investment center manager should be evaluated based on return on investment,not residual income.
C)A profit center manager should be evaluated based on segment margin,not profit margin.
D)A cost center manager should be evaluated on costs and revenues,not just costs.

Question

Quizplus · Accepted Answer

The controllability principle suggests that managers should be evaluated based on measures over which they have control. A profit center manager controls segment margin (revenues and costs of their segment) more directly than the overall profit margin of the company, which can be influenced by factors outside their control.

Which of the Following Statements Best Represents the Controllability Principle