Caveman Software operates stores within five regions.Regional managers are held accountable for marketing,advertising,and sales decisions,and all costs incurred within their region.In addition,regional managers decide whether new stores will open,where the stores will be located,and whether the stores will lease or purchase the facilities.Store managers,in contrast,are accountable for marketing,advertising,sales decisions,and costs incurred within their stores.Ideally,on the basis of this information,what type of responsibility center should the software company use to evaluate its regions and stores?

Question

Quizplus · Accepted Answer

The best choice for evaluating both regions and stores is a combination of profit and investment centers, known as a profit center with investment center characteristics. This allows for both regional and store managers to be held accountable for their costs and decisions, while also considering the profitability and return on investment of their respective areas. This aligns with the fact that regional managers make decisions regarding new store locations and leasing/purchasing decisions, which have significant financial implications that should be evaluated. Meanwhile, store managers should focus on the profitability of their individual stores. Therefore, a hybrid profit and investment center approach is the most appropriate for evaluating both regions and stores in this scenario.

Caveman Software Operates Stores Within Five Regions