For each of the following responsibility centers, state the typical focus of the responsibility report and briefly discuss the focus

Question

Responsibility Center Focus of the
Responsibility Report
Brief Discussion of the Focus
Cost

Revenue

Profit

What will be an ideal response

Answer 1

Responsibility Center Focus of the
Responsibility Report
Brief Discussion of the Focus
Cost Flexible budget variance Because the manager is responsible for costs, the evaluation is focused on the flexible budget variance—the difference between actual cost results and the flexible budget.
Revenue Flexible budget variance and sales volume variance The manager is responsible for revenues. The flexible budget variance focuses on the differences in sales prices.
The sales volume variance reflects the difference between the planned sales as shown in the static budget and the actual sales.
Profit Revenues and expenses; flexible budget variances Managers of profit centers are responsible for both generating revenue and controlling costs, so their performance reports include both revenues and expenses along with flexible budget variances.