Using cost as a departmental or business unit performance measure can actually result in actions that raise costs for the organization.

Question

Quizplus · Accepted Answer

When cost is the only performance measure, departments or business units may focus solely on reducing their own costs, even if it means increasing costs for other areas of the organization. This can result in actions such as cutting quality, reducing customer service, or delaying investments in technology or employee training, which may ultimately lead to higher costs for the organization as a whole.

Using Cost as a Departmental or Business Unit Performance Measure