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Financial Responsibility Centres in Organisations

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Financial Responsibility Centres in Organisations

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Questions and Answers

What is the primary purpose of Financial Results Control Systems in for-profit firms?

To summarise performance in non-financial terms
To evaluate performance solely through financial objectives
To implement conflicting signals about strategy significance
To influence employee behaviour through financial measures (correct)

What is a benefit of using financial measures in Financial Results Control Systems?

They are expensive to implement
They provide an subjective evaluation of performance
They are difficult to compare across different markets
They offer a concise evaluation of performance by combining various operating strategies (correct)

What is an advantage of Financial Results Control Systems compared to other forms of management control?

They are highly subjective in nature
They are more expensive to implement
The cost of implementing these control systems is small compared to other forms of management control (correct)
They require more information than is currently available

What is a characteristic of financial measures in Financial Results Control Systems?

They are concise and objective (D) Signup and view all the answers

What is a core element of Financial Results Control Systems, in addition to Financial Responsibility Centres?

Planning and Budgeting systems and Incentive plans or contracts (A) Signup and view all the answers

Why do financial measures act as a reminder to employees in Financial Results Control Systems?

Because they remind employees that initiatives will benefit the organisation only if they result in improved financial performance (A) Signup and view all the answers

What is the main characteristic of a revenue centre?

Managers are accountable for generating revenues (B) Signup and view all the answers

What type of cost centres have a direct and quantifiable relationship between inputs and outputs?

Standard/engineered cost centres (B) Signup and view all the answers

What is a characteristic of profit centres?

Managers have significant influence over both revenues and costs (D) Signup and view all the answers

What is the name of the type of profit centre that does not directly interface with the market?

Micro profit centre (B) Signup and view all the answers

What is the name of the financial metric used to evaluate investment centres?

All of the above (D) Signup and view all the answers

What is the term used to describe a revenue centre where managers are also held responsible for some expenses?

Net revenue centre (B) Signup and view all the answers