A Boreal Bikes store manager sets local promotions and controls store wages, but head office chooses the building and signs the lease. The store is a:
A Boreal Bikes store manager sets local promotions and controls store wages, but head office chooses the building and signs the lease. The store is a:
Answer
Profit centre — she controls revenue and costs, not the investment
Options - A. Profit centre — she controls revenue and costs, not the investment - B. Investment centre — a store is an asset she operates and is judged on - C. Revenue centre — a store exists to sell - D. Cost centre — the lease is the largest cost Why - A. Correct — revenue and controllable costs are hers; the building and the lease are not, so no ROI. - B. Operating an asset is not controlling the investment in it; she cannot buy, sell or replace the store. - C. She controls costs as well as revenue, so revenue alone would ignore half of what she decides. - D. She also controls revenue; a cost centre sells nothing.
OpenStax Accounting v2 §9.1–9.3 (the five types); Hermanson Vol 2 ch 25 (responsibility centres); Heisinger & Hoyle §11.1