Profit center income statements are most meaningful to managers when they are prepared:

Question

Quizplus · Accepted Answer

Profit center income statements are most meaningful to managers when they are prepared on a variable cost basis. This is because it separates fixed costs from variable costs and allows managers to better understand the impact of changes in sales volume or cost structure on profitability. A full cost basis may not accurately reflect the profitability of a product or operation, as it includes allocated fixed costs that may not be directly related to that operation. Cash basis statements only show cash received and paid out, which may not accurately reflect profitability. A single-step format only shows total revenue and total expenses, without separating costs by behavior. A multiple-step format may be useful to show additional information, but it is not as important as the cost behavior separation.

Profit Center Income Statements Are Most Meaningful to Managers When