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?

Question

Quizplus · Accepted Answer

Output volume is an appropriate measure for a cost center as it evaluates the amount of output or activity generated by the center without considering the cost of the inputs or the revenue generated. Cost centers are responsible for controlling costs and maximizing efficiency in their use of resources, and a measure of output volume can help evaluate their performance in achieving this goal. Return on investment and residual income are measures appropriate for evaluating the performance of profit centers, while EBIT is used to evaluate the overall profitability of the company.

In Designing an Effective Management Control System for a Multinational