1. Accounting 220
Wendy Lile
University of Phoenix

2.  All levels of management report cost and
revenues
 “Essential part of any effective system of
budgetary control.” (Kieso, Kimmel,
Weygandt, 2003, p.351)
 3 types of Responsibility Centers: Cost, Profit,
and Investment

3. Cost center: A responsibility center in which a
manager is responsible only for costs.

4. Responsibility reports that
compare flexible budget
data with controllable
costs.

5. Profit center: A responsibility center in which a
manager is responsible for both revenues and
costs.

6.  Distinguishing between direct
and indirect fixed costs
 Reporting budgeted and actual
controllable revenues and costs

7. Investment center: A responsibility center in
which a manager is responsible for revenues,
costs, and investments.

8.  Reporting their Return on Investment (ROI).
“The return on investment is considered to be
superior to any other performance
measurement because it shows the
effectiveness of the manager in utilizing the
assets at his or her disposal.” (Kieso, Kimmel,
Weygandt, 2003, p.359)

9. ROI =
Operating income
Average operating assets
Beginning net book value +
Ending net book value
2

10. Responsibility accounting is a system that
measures the results of each responsibility
center according to the information
managers need to operate their centers.

11. Kieso, D., Kimmel, P., Weygandt, J. (2003).
Essentials of Accounting: Tools for Business
decision making (2nd ed.) Hoboken, NJ: John
Wiley and Sons, Inc.