Multiple Choice
If a prime contractor subcontracts some of the work, which type of accounting is primarily used to track the costs associated with both the contractor's and subcontractor's activities?
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1. Introduction to Accounting
Types of Accounting
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A _____ center manager is evaluated on their success in generating income.
A
cost
B
revenue
C
investment
D
profit
Verified step by step guidance1
Understand the concept of responsibility centers in financial accounting. Responsibility centers are parts of an organization where managers are responsible for certain financial outcomes, such as costs, revenues, or profits.
Identify the type of responsibility center being described. A cost center focuses on controlling costs, a revenue center focuses on generating income, an investment center focuses on return on investments, and a profit center focuses on overall profitability.
Analyze the question: It asks which type of center manager is evaluated based on their success in generating income. Generating income is directly related to revenue, which is the total amount earned from sales or services.
Match the correct term to the description provided. Since the question specifies 'success in generating income,' the correct type of center is a revenue center.
Conclude that the correct answer is 'revenue,' as it aligns with the evaluation criteria of generating income.
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