Question

Managerial Accounting question?

18. Responsibility Centers. Petroleum Products, Inc., operates primarily in the United States and has several segments: Accounting and finance: responsible for recording financial information and preparing financial reports 2. Human resources: responsible for hiring employees and maintaining personnel records. 3. Retail stores: responsible for sales prices and all costs within each store. 4. Advertising: responsible for promotional materials. 5 Production: responsible for manufacturing company products 6. International operations: acts as an 1. independent segment responsible for all facets of the business outside of the United States. Required: For each of the preceding segments, identify whether it is a cost center, profit center, or investment center. Explain your answer. 18. Responsibility Centers (1) (2) (3) (4) (5) (6)

Answer 1

S No	Cen tre	Reason
1	Cost Cen tres	They do not contribute to the profits of the company and also maintain records on which cost is incurred
2	Cost Cen tres	They responsible for hiring and retaining personnel and only costs are incurred
3	Profit Cen tres	Each store is treated as a separate profit cen tre and having responsibility for costs and revenues
4	Cost Cen tres	Responsible for the advertisement costs incurred
5	Cost Cen tres	Only manufacturing costs are incurred
6	Investment Cen tres	It is the firms foreign subsidiary enabling it to take independent decisions.