Page 16 - CIMA MCS Workbook May 2019 - Day 1 Tasks

Chapter 4

ADVANCED MANAGEMENT

ACCOUNTING (P2) FAMILIARISATION

1. RESPONSIBILITY CENTRES

Jord operates with several divisions, each functioning as cost centres.

EXERCISE 1:

a) Explain the differences between cost centres, profit centres and investment centres and on
what bases the managers of these centres could be evaluated. For each type of responsibility
centre, explain what types of decision the managers would be able to make.

b) Discuss the advantages and disadvantages of operating the divisions as cost centres.

2. CAPITAL INVESTMENT PROCESS

Jord doesn’t appear to have a history of undertaking large investments, but the company may do
this in future in order to grow.

EXERCISE 2:

Describe the main features of a robust capital investment process that should be in place to
ensure the best decisions are regarding new capital projects. State who should be involved at
each stage of the process.

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