Brilliant Stone Corporation (BSC) manufactures decorative, sculpted accessories that are sold by interior decorators and home furnishing stores. The following situation concerns two BSC employees: Mika George, head of the company's Billing Department, and Frank Merser, the firm's general manager.
George's Billing Department makes heavy use of hourly employees and is evaluated as a cost center. Understanding the need for prompt collection of receivables, George strives to run a first-class operation. George also understands the need to contribute in a big way to BSC's financial performance so she continually strives to minimize Billing Department expenses.
Unfortunately, George experienced a heated discussion with Merser several weeks ago, the subject being the shoddy operation that she is running. Merser complained loudly about the lack of timely billings to customers and the general lack of attention to detail, as many complaints have surfaced about erroneous invoices and customer statements.
Required:
A. What is meant by the term "responsibility accounting?"
B. What measure(s) of performance would companies normally use to evaluate a cost-center manager?
C. Does Merser have a valid reason to be upset with George? Given the nature of the Billing Department, did George err in her quest to minimize expenses? Explain.
D. Is it likely that the Billing Department could be evaluated as a profit center? Why?

Question

Brilliant Stone Corporation (BSC) manufactures decorative, sculpted accessories that are sold by interior decorators and home furnishing stores. The following situation concerns two BSC employees: Mika George, head of the company's Billing Department, and Frank Merser, the firm's general manager.
George's Billing Department makes heavy use of hourly employees and is evaluated as a cost center. Understanding the need for prompt collection of receivables, George strives to run a first-class operation. George also understands the need to contribute in a big way to BSC's financial performance so she continually strives to minimize Billing Department expenses.
Unfortunately, George experienced a heated discussion with Merser several weeks ago, the subject being the shoddy operation that she is running. Merser complained loudly about the lack of timely billings to customers and the general lack of attention to detail, as many complaints have surfaced about erroneous invoices and customer statements.
Required: 
A. What is meant by the term "responsibility accounting?"
B. What measure(s) of performance would companies normally use to evaluate a cost-center manager?
C. Does Merser have a valid reason to be upset with George? Given the nature of the Billing Department, did George err in her quest to minimize expenses? Explain.
D. Is it likely that the Billing Department could be evaluated as a profit center? Why?

Quizplus · Accepted Answer

The Answer of Brilliant Stone Corporation (BSC) manufactures decorative, sculpted accessories that are sold by interior decorators and home furnishing stores. The following situation concerns two BSC employees: Mika George, head of the company's Billing Department, and Frank Merser, the firm's general manager.
George's Billing Department makes heavy use of hourly employees and is evaluated as a cost center. Understanding the need for prompt collection of receivables, George strives to run a first-class operation. George also understands the need to contribute in a big way to BSC's financial performance so she continually strives to minimize Billing Department expenses.
Unfortunately, George experienced a heated discussion with Merser several weeks ago, the subject being the shoddy operation that she is running. Merser complained loudly about the lack of timely billings to customers and the general lack of attention to detail, as many complaints have surfaced about erroneous invoices and customer statements.
Required: 
A. What is meant by the term "responsibility accounting?"
B. What measure(s) of performance would companies normally use to evaluate a cost-center manager?
C. Does Merser have a valid reason to be upset with George? Given the nature of the Billing Department, did George err in her quest to minimize expenses? Explain.
D. Is it likely that the Billing Department could be evaluated as a profit center? Why?

Brilliant Stone Corporation (BSC) Manufactures Decorative, Sculpted Accessories That Are