Which one of the following is a suitable way to evaluate cost centres?
A)Compare the actual profit generated with expected profit.
B)Compare actual total costs with flexible budget data.
C)Compare actual controllable costs with static budget data.
D)Compare actual controllable costs with flexible budget data.

Question

Quizplus · Accepted Answer

Evaluating cost centres involves comparing actual costs incurred with the budgeted costs. Choice D is the best option as it involves comparing actual controllable costs with flexible budget data. This allows for adjustments for changes in activity levels and provides more accurate information for cost control and decision making. Comparing actual total costs with flexible budget data (choice B) also provides similar information, but it may not provide insights into cost variances due to changes in activity levels. Comparing actual profit generated with expected profit (choice A) is not suitable as it may not reflect the cost efficiency of the cost centre. Comparing actual controllable costs with static budget data (choice C) does not consider changes in activity levels and may not provide reliable information for cost control and decision making.

Which One of the Following Is a Suitable Way to Evaluate