Which of the following options represents a revenue center?
Show answer Hide answer
Answer: A. sales department
Explanation
A sales department is structured as a revenue center because its managers are held accountable for generating revenues. Revenue centers do not have direct control over manufacturing costs or capital investments. Performance is evaluated strictly by comparing actual sales against budgeted targets. Responsibility accounting divides organizations into cost, revenue, profit, and investment centers. Revenue centers focus exclusively on the top line of the income statement. Managers in these units concentrate on sales volume, pricing strategies, and customer acquisition.
Establishing revenue centers helps large corporations delegate sales accountability effectively. It allows executives to track which departments successfully drive top-line growth. Sales and marketing units are the most common examples of this structure. An investing center holds managers accountable for both operating income and invested capital. Marketing departments can sometimes function as revenue centers, but sales departments are the primary example. Segment department is a general structural label rather than a specific responsibility center.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. When the total debit balance equals the total credit balance in a trial balance, it indicates that:
Show answer Hide answer
Answer: D. Mathematically Capital+Liabilities=Assets
A balanced trial balance confirms mathematical equality where Assets equal Liabilities plus Capital. This equation forms the fundamental accounting framework underlying double-entry bookkeeping. Equality in the trial bal...
Q2. What does it indicate when the credit side of a cash book bank column exceeds the debit side?
Show answer Hide answer
Answer: A. Bank overdraft
If the credit side of the cash book bank column exceeds the debit side, it signifies a bank overdraft. Credits in the cash book represent cash payments and withdrawals out of the bank. Exceeding the debit receipts means...
Q3. What is indicated when the debit side of a bank account is larger than its credit side?
Show answer Hide answer
Answer: A. Cash at bank
A larger debit side in a bank account indicates positive funds deposited, representing cash at bank. In asset accounts, debits increase the value while credits decrease it. A net debit balance means the business owns pos...
Q4. Expending additional resources to establish basic or ideal standards is categorized as ____________?
Show answer Hide answer
Answer: B. potential management response
Management responses involve deploying additional resources and efforts to establish rigorous basic or ideal standards. Setting these high standards requires specialized engineering studies and operational oversight. Man...
Q5. Liabilities that must be settled within a single month are referred to as _____________?
Show answer Hide answer
Answer: C. Current liabilities
Current liabilities are obligations that are expected to be settled in the short term, typically within a normal operating cycle or year.
Q6. When total debit balances equal total credit balances, the trial balance merely verifies the ____________ and does not guarantee that recording or posting errors are absent.
Show answer Hide answer
Answer: A. Arithmetic accuracy
A trial balance verifying that debits equal credits only proves arithmetic accuracy and does not catch certain errors like complete omission. Mathematical balance confirms that equal debits and credits were posted. Howev...