The Best Measure of the Performance of the Manager of a Profit

question 11

Multiple Choice

The best measure of the performance of the manager of a profit center is the

• A) rate of return on investment.
• B) success in meeting budgeted goals for controllable costs.
• C) amount of controllable margin generated by the profit center.
• D) amount of contribution margin generated by the profit center.

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Definitions:

TR > TC

A situation where total revenue (TR) is greater than total costs (TC), indicating a company is making a profit from its operations.

Short Run

A period in which at least one of a firm's inputs is fixed, limiting its capacity to adjust its output levels.

Long Run

A period of time in which all factors of production and costs are variable, allowing firms to adjust all inputs.

Marginal Cost

The cost of producing one additional unit of a good or service.