Page 448 - F2 - MA Integrated Workbook STUDENT 2018-19

Chapter 16

Test your understanding 5

C

550/75 = 7.33 times

Test your understanding 6

B

The manager of a profit centre can exercise control over revenues and
controllable costs, but has no influence concerning the capital invested in the
centre.

Contribution (i) would be a useful performance measure because a profit
centre manager can exercise control over sales revenue and variable costs.
Controllable profit (ii) would also be useful as long as any overhead costs
charged in deriving the profit figure are controllable by the profit centre
manager. Apportioned central costs would not be deducted when calculating
controllable profit. Return on investment (iii), and residual income (iv) would
not be useful because they require a measure of the capital invested in the
division.

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