The Most Common Method of Evaluating a Profit Center Manager

question 84

Multiple Choice

The most common method of evaluating a profit center manager is the:

• A)segmented income statement.
• B)budgetary planning and control system.
• C)sales system.
• D)return on investment.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, showing how much revenue contributes towards covering fixed costs and generating profit.

Absorption Costing

A method in accounting where all costs of manufacturing are absorbed by the units produced.

Variable Costing

A costing method that includes only variable production costs (direct labor, materials, and overhead) in product costs, excluding fixed costs.

Fixed Overhead

Denotes the regular, recurring costs associated with running a business that do not fluctuate with production volume, such as rent, salaries, and utilities.