Responsibility accounting aims to
ensure that costs become the responsibility of a specific manager.
Responsibility accounting divides an organisation into responsibility centres (cost, revenue, profit and investment centres) and assigns each cost and revenue to the manager who can control it. Actual results are then reported centre by centre and compared with budget for the items under that manager's control.
Its aim is to make costs the responsibility of a specific manager, so that accountability is clear and any deviation can be traced to a person who can act on it.
Punishing managers is not its purpose; the system uses variances for control, feedback and motivation rather than blame. Allocating costs to all areas of the business is cost apportionment for product costing, whereas responsibility accounting deliberately charges managers only with controllable costs, not arbitrary shares of common costs.
Cost reduction may follow from better control, but it is not the defining aim; responsibility accounting also covers revenue, profit and investment centres where the focus is not cost alone.
Hence, ensure that costs become the responsibility of a specific manager.
Important Questions from Cost and Management Accounting
Match List I with List II
List I
(Type of Costing)
List II
(Description)
A. Marginal Costing I. Integrated approach to determine product features, product price, product costs and product design that helps ensure a company to earn reasonable profit on new products. B. ABC Costing II. The amount of any given volume of output by which the aggregate costs are changed if the volume of output is increased by one unit. C. Target Costing III. Used when identical units are produced through an on-going series of production steps. D. Process Costing IV. Costing system in which costs being with tracing of activities and then to producing the product. Choose the correct answer from the options given below:
Which one of the following is PV ratio for the company?
Which one of the following is the break-even point in units for the company?
Which one of the following is the break-even point in terms of rupees?
Which one of the following is desired sales volume in units to earn a profit of Rs. 60,000?
