Responsibility Centers Week 5 From Chapter 15 complete question 3 page 550 on responsibility centers Use your text and one additional source You must respond to at least two of your other classmates postings to receive full credit Responsibility Center is defined as an organizational unit that controls identifiable revenue or expense items Responsibility Centers may be divided into three categories cost center profit center and investment center Edmonds 2010 pg 532 Responsibility accounting is an essential concept of the accounting performance measurement systems A cost center is an organizational unit that incurs expenses but does not generate revenue Profit center not only acquires costs but it also produces revenue Managers that are in charge of a profit center are judged on their ability to produce revenue in addition to costs Managers of investment centers are accountable for assets and liabilities as well as earnings Edmonds T Investment center managers are responsible for both profit and the assets used in generating profit Thus an investment center adds more to a manager s scope of responsibility than does a profit center just as a profit center involves more than a cost center Investment center managers are typically evaluated in terms of return on asset Edmonds 2010 pg 550 Cost differs from profit and investment because it normally falls on the lower levels of the organization charts Edmonds 2010 pg 550 This means that the absence of revenue or at least the absence of control over revenue generation With profit the manager is judged on the ability to produce revenue in excess of expenses Edmonds 2010 pg 550 Profits produced from operations and the cash dividends paid during the accounting period The statement of cash flows divides receipts and payments of cash into three categories The section on operating activities show the cash effects of transactions that creates revenue and expenses It shows what cash is received from the company operations and provides a good measure for the company s ability to generate cash for growth and profitability Managers of investment centers are accountable for assets and liabilities as well as earnings Edmonds 2010 pg 550 Investment center managers are responsible for both profit and the assets used in generating profit Therefore an investment center adds more to a manager s range of responsibility than a profit center just like a profit center includes more than a cost center Investment center managers are typically evaluated in terms of return on assets Responsibility centers are decentralized businesses that are usually split up into individual reporting units Edmonds 2010 pg 550 Stephani Dayton References Edmonds T Survey of Accounting 2nd Edition 2nd ed McGraw Hill Primis Custom Publishing Retrieved from http online vitalsource com books 0390124117 page 550 Lehmann J 2011 Top stories of 2010 Charlottesville United States Charlottesville SNL Financial LC Retrieved from http search proquest com docview 879752977 accountid 32521