Question

Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.

a. As a practical matter, control of costs or revenues may be shared rather than absolute.
b. The concept of control is crucial to an effective responsibility accounting system.
c. Managers lose motivation when they are held accountable for actions that are beyond their scope of control.
d. Each manager should be evaluated on the costs but not the revenues that are under his or her control.

Answer 1

Each manager should be evaluated on the costs but not the revenues that are under his or her control.

Step-by-step explanation:

Controllability refers to the amount of influence that a manager has over costs or revenues. In responsibility accounting, only those elements are identified which are controllable. A person is given the responsibility for managing such kind of elements.

A person is given an authority to control the costs so that they are able to keep up their performance.

However, according to the controllability concept to responsibility accounting,

each manager should also be evaluated on the revenues that are under his or her control.