Question

How is performance evaluated for a profit center?

1) Actual costs incurred compared to budgeted costs.
2) Actual segment margin compared to budgeted segment margin.
3) Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.
4) None of these.

Answer 1

Performance evaluation for a profit center involves comparing actual results to budgeted targets and assessing return on investment.

Step-by-step explanation:

Performance evaluation for a profit center typically involves comparing actual results to budgeted targets and assessing return on investment. The most common methods used to evaluate performance for a profit center include:

1. Actual costs incurred compared to budgeted costs
2. Actual segment margin compared to budgeted segment margin
3. Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.

These methods help assess how well the profit center is meeting its financial goals and managing its resources.