Question

*10) Which of the following statements is true about responsibility accounting statements?*

A) Responsibility accounting excludes controllable costs.
B) Responsibility accounting segregates fixed costs and variable costs.
C) Responsibility accounting excludes fixed costs and variable costs.
D) Responsibility accounting segregates uncontrollable costs from controllable costs.
Objective 6.5

Answer 1

Responsibility accounting is a method of accounting that assigns costs to specific departments or individuals. Option D) Responsibility accounting segregates uncontrollable costs from controllable costs. It holds departments or individuals accountable for their budget and actual costs.

Step-by-step explanation:

Responsibility accounting is a method of accounting that assigns costs to specific departments or individuals who have control over those costs. It focuses on tracking the performance of individual departments or individuals and holds them accountable for their budget and actual costs.

Option D) Responsibility accounting segregates uncontrollable costs from controllable costs is the correct statement. Responsibility accounting identifies costs that are controllable by the department or individual being evaluated and separates them from uncontrollable costs, such as company-wide fixed costs.

For example, a manager may be responsible for the production department's costs. The costs directly under their control, like materials and labor, are controllable costs. However, costs such as rent, which are common to all departments, are considered uncontrollable costs.