Many Companies View Performance Margin as a More Useful Tool

question 88

Multiple Choice

Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers.This is because:

• A)Managers have no control over traceable fixed costs.
• B)Performance margin is not affected by the size of the department.
• C)Performance margin indicates the change in operating income that would result from closing the department.
• D)Performance margin includes only those revenue and costs under the manager's direct control.

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Definitions:

Restricts Output

A strategy or condition that limits the amount of goods and services produced, often to maintain prices or due to limited resources.

Competitive Industry

An industry where numerous sellers offer products or services that are similar, ensuring no single entity has significant market power to determine prices.

Covert Collusion

An implicit secret agreement between parties to fix prices, divide markets, or rig bids without explicit verbal agreement, making it hard to detect and prosecute.

Cartel

An association of independent businesses organized to control prices and production, restrict competition, and monopolize markets.