Final answer:
To set up a responsibility accounting structure for Radisson Hotels, speaking points can be prepared for management. These points can include examples of an investment center, a profit center, and a cost center, along with the difference between a profit center and an investment center.
Step-by-step explanation:
Responsibility accounting is a management control system that assigns responsibility for costs and revenues to various segments or centers within an organization. It helps in evaluating the performance of these segments and making informed decisions. Radisson Hotels can implement a responsibility accounting structure by establishing different types of centers, such as investment centers, profit centers, and cost centers.
An investment center is a segment of an organization that is responsible for generating both revenues and expenses and has control over the investment in assets. The performance of an investment center is measured based on both profitability and return on investment (ROI). For example, in a hotel context, the hotel chain division would be considered an investment center as it has control over its own revenues, expenses, and investment in assets.
A profit center is a segment of an organization that is responsible for generating revenues and controlling costs. The performance of a profit center is assessed based on its profitability. For instance, a specific hotel within the Radisson Hotels chain can be considered a profit center as it is responsible for generating its own revenues and managing its expenses.
A cost center is a segment of an organization that is responsible for incurring costs but does not have direct control over generating revenues. The performance of a cost center is evaluated based on its ability to control costs within budget. An example of a cost center in Radisson Hotels could be the accounting department, which incurs costs related to accounting activities but does not directly generate revenues.
The main difference between a profit center and an investment center is that an investment center has control over investment in assets, while a profit center does not. This means that an investment center is responsible for generating not only profits but also managing capital investments. In contrast, a profit center focuses solely on generating profits without having control over capital investments.