In preparing an income statement that measures contribution margin and responsibility margin for a responsibility center, two concepts are applied in classifying costs. One is whether the costs are variable or fixed. The other is whether the costs are:
A) Product costs or period costs.
B) Traceable to the responsibility center.
C) Under the control of the manager.
D) Transfer prices.

Question

Quizplus · Accepted Answer

In preparing an income statement that measures contribution margin and responsibility margin for a responsibility center, costs are classified as traceable or not traceable to the responsibility center. Variable and fixed cost categorization is used to determine the contribution margin. However, in order to determine responsibility margin, the traceable costs are subtracted from the contribution margin. Therefore, the correct option is B - whether the costs are traceable to the responsibility center.

In Preparing an Income Statement That Measures Contribution Margin and Responsibility