ExpertEasy2 marksMultiple Choice
ACCA · Question 04 · Syllabus A: Nature, source and purpose of management information
The IT support department of a global fintech company provides internal services to other departments. The manager of the IT department has control over staffing costs, software licenses, and equipment maintenance, but does not generate external revenue or make decisions on capital investments.
What type of responsibility center is the IT support department?
The IT support department of a global fintech company provides internal services to other departments. The manager of the IT department has control over staffing costs, software licenses, and equipment maintenance, but does not generate external revenue or make decisions on capital investments.
What type of responsibility center is the IT support department?
Answer options:
A.
Profit center
B.
Investment center
C.
Revenue center
D.
Cost center
How to approach this question
Evaluate what the manager has control over. If it's only costs, it's a cost center.
Full Answer
D.Cost center✓ Correct
Responsibility centers are classified by the scope of a manager's control. A cost center manager is accountable only for costs. Since the IT manager controls staffing and maintenance but not revenue or capital investments, it is a cost center.
Common mistakes
Assuming internal chargebacks make it a profit center (unless explicitly stated as an artificial profit center, it remains a cost center).
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