For what purpose is controllable margin most useful?
A)preparing the master budget
B)performance evaluation of profit centres
C)break-even analysis
D)evaluating cost centres

Question

Quizplus · Accepted Answer

Controllable margin is most useful for performance evaluation of profit centres, as it represents the amount of revenue that can be attributed to the profit centre after deducting all controllable expenses. This allows for a more accurate assessment of the profit centre's performance and the effectiveness of its management in controlling costs and generating revenue. Option A (preparing the master budget) and C (break-even analysis) may also use controllable margin as a tool, but they are not the primary purposes. Option D (evaluating cost centres) focuses more on analyzing direct and indirect costs and how they contribute to the overall cost of an organization or production process.

For What Purpose Is Controllable Margin Most Useful