In a division that is treated as a profit centre, which one of the following calculations provides the total of controllable profit?
A)Contribution less all fixed costs
B)Divisional profit less head office cost allocation
C)Sales less variable costs less controllable fixed costs
D)Sales less all fixed and variable costs

Question

Quizplus · Accepted Answer

Controllable profit refers to the profit that can be directly controlled by the management of the division. It is calculated by deducting all the controllable fixed costs and variable costs from the sales revenue. The formula for calculating controllable profit is C = S - VC - CFC, where C is controllable profit, S is sales revenue, VC is variable cost, and CFC is controllable fixed cost. Therefore, option C (Sales less variable costs less controllable fixed costs) is the correct calculation for total controllable profit in a division that is treated as a profit centre.

In a Division That Is Treated as a Profit Centre