Asked by Harleen Sandhu on Sep 24, 2024
Verified
A parent company rewarding managers on profit centers can simply
A) Subtract division costs from the division revenue and reward the manager on the difference
B) Add the division costs to the division revenue and reward the manager on the sum
C) Reward the manager on the revenue of the division
D) Reward the manager on the costs of the division
Division Costs
Division costs pertain to the expenses associated with operating a specific department or division within a larger organization.
Division Revenue
The total amount of income generated from sales or services provided by a specific division within a company.
Profit Centers
Individual segments, departments, or divisions of a business that are responsible for generating their own revenue and profit, allowing for tracking and analysis of their financial performance separately from the overall company.
- Comprehend the influence of various reward and assessment systems on the choices of division managers and the performance of their divisions.
- Examine the outcomes of compensating managers on the basis of division revenues rather than division profits.
Verified Answer
KS
K. Savannah Watts3 days ago
Final Answer :
A
Explanation :
Subtracting division costs from division revenue will give the profit generated by the division. Rewarding the manager on the difference will incentivize them to increase profits and control costs. The other options (B, C, and D) do not give an accurate measure of the manager's performance as they do not take into account the costs associated with generating revenue.
Learning Objectives
- Comprehend the influence of various reward and assessment systems on the choices of division managers and the performance of their divisions.
- Examine the outcomes of compensating managers on the basis of division revenues rather than division profits.