Which of the Following Statements Follows from the Controllability Principle

question 92

Multiple Choice

Which of the following statements follows from the controllability principle?

• A)A profit center manager should be evaluated based on residual income,not return on investment.
• B)An investment center manager should be evaluated based on return on investment,not residual income.
• C)A profit center manager should be evaluated based on segment margin,not profit margin.
• D)A cost center manager should be evaluated on costs and revenues,not just costs.

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Definitions:

Total Expenditures

The overall amount spent on goods and services.

Utility Function

A mathematical representation of how individual preferences are aggregated to represent satisfaction or utility from consuming goods and services.

Marginal Utility

The additional satisfaction or benefit received by consuming one more unit of a good or service.

Budget Line

A representation of all possible combinations of two goods that an individual can afford given their income and the prices of the goods.