A Responsibility Center in Which a Manager Is Responsible for Both

question 108

Multiple Choice

A responsibility center in which a manager is responsible for both revenues and costs is a(n)

• A) cost center.
• B) revenue center.
• C) profit center.
• D) investment center
• E) None of these.

Understand the accounting treatments for losses on long-term contracts and special revenue recognition cases such as franchise fees and bundled sales transactions.

Distinguish between revenue recognition methods and their impact on financial statements and retained earnings.

Comprehend the accounting for billings on construction in progress and its effects on balance sheets.

Recognize the ethical considerations related to revenue recognition and the potential for earnings management within GAAP guidelines.

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Definitions:

Directional Long Funds

Investment funds that aim to profit from an anticipated upward movement in the price of the assets they hold.

Betas

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Equity Hedge Funds

Hedge funds that primarily invest in stocks in order to gain from an expected increase in equity prices.

Systematic Risk

The inherent risk that affects the entire market or market segment, often referred to as market risk or un-diversifiable risk.