The performance of a profit center manager is evaluated by comparing the profit center's operating income:
A) with the other profit centers' operating income.
B) with the profit center's budgeted operating income.
C) with the organization's budgeted net income.
D) with the organization's non-operating income.

Question

Quizplus · Accepted Answer

Evaluating a profit center manager's performance is done by comparing the profit center's operating income with the budgeted operating income for the same period. This helps to determine whether the manager has effectively controlled costs and generated revenue to meet or exceed the budgeted targets. Comparing the profit center's operating income with other profit centers' operating income does not provide an accurate assessment of the manager's performance. Comparing the profit center's operating income with the organization's budgeted net income or non-operating income is not appropriate since the focus is on the profit center's performance, which is a subset of the organization's overall performance.

The Performance of a Profit Center Manager Is Evaluated by Comparing