In designing an effective management control system for a multinational corporation,the accountant should measure factors appropriate for each unit's level of responsibility. Which of the following measures would be appropriate for evaluating the performance of a cost center?

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Quizplus · Accepted Answer

Output volume is an appropriate measure for evaluating the performance of a cost center as it indicates how much output the cost center is producing for the given cost incurred. As cost centers do not generate revenues, measures like return on investment and EBIT are not applicable. Residual income might not be appropriate as it is a measure of economic profit and not directly related to the inputs and outputs of a cost center.

In Designing an Effective Management Control System for a Multinational