Chapter 5 - Responsibility Centres

Part B. Cost and performance management of responsibility centres- 30%

Have a go at the few chapter questions to test your understanding of Chapter 5.

This quiz is for registered users only.

Need more practice right now? You can go directly to the practice kit and answer this chapter's questions:

Part B.1 Responsibility Centres - 25 questions

or go directly to the complete P2 practice kit and select what you want to practice:

Complete P2 Practice Kit with 500 Q&A



      Indicative syllabus content
B.1 Discuss decision making in responsibility centres. (a) Discuss the information needed for decision making in different organisational structures.
  • Relevant cost information for cost centre managers: controllable and uncontrollable costs and budget flexing.
  • Relevant revenue and cost information for profit and investment centre managers: cost variability, attributable costs, controllable costs and identification of appropriate measures of profit centre ‘contribution’.
  • Alternative measures of performance for responsibility centres.
B.2 Discuss issues arising from the use of performance measures and budgets for control. (c) Discuss the criticisms and behavioural aspects of budgeting in responsibility centres.
  • Behavioural issues in budgeting: participation in budgeting and its possible beneficial consequences for ownership and motivation; participation in budgeting and its possible adverse consequences such as ‘budget padding’ and manipulation; setting budget targets for motivation; implications of setting standard costs etc.
  • Criticisms of budgeting and the arguments for and against ‘beyond budgeting’.