Question

In responsibility accounting, unit managers are evaluated on:

A. costs they cannot control
B. costs they can control
C. uncontrollable costs
D. costs in decentralized units

Answer 1

Unit managers in responsibility accounting are evaluated based on the costs they can control, aligning accountability with their direct influence over financial outcomes.

Step-by-step explanation:

In responsibility accounting, the performance of unit managers is evaluated based on the costs they can control. This accounting practice aligns managerial assessment with the areas where they have decision-making authority and influence. Responsibility accounting holds managers accountable for the financial outcomes of their areas of responsibility, enabling more effective management and decision-making.

Costs that a manager can control typically include direct materials, direct labor, and any overheads that can be influenced by the manager's actions. On the other hand, uncontrollable costs, like those mentioned in Box 20.2, such as lighting and temperature control in public spaces or street lighting, are generally not considered in the evaluation of a unit manager, as these are largely influenced by external policies and social contracts.