Which of the following statements follows from the controllability principle?
A)A profit center manager should be evaluated based on residual income,not return on investment.
B)An investment center manager should be evaluated based on return on investment,not residual income.
C)A profit center manager should be evaluated based on segment margin,not profit margin.
D)A cost center manager should be evaluated on costs and revenues,not just costs.

Question

Quizplus · Accepted Answer

The controllability principle suggests that managers should be evaluated based on factors they can control. A profit center manager can control the segment margin, which is the profit after direct costs, rather than the overall profit margin, which may include uncontrollable costs.

Which of the Following Statements Follows from the Controllability Principle