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Chapter 24: Q2SE (page 1356)

Question:Each of the following managers works for a national chain of hotels and has been given certain decision-making authority. Classify each of the managers according to the type of responsibility center he or she probably manages.

a. Manager of the Central Reservation Office

b. Managers of various corporate-owned hotel locations

c. Managers of the Northeast and Southeast Corporate Divisions

d. Manager of the Housekeeping Department at one hotel

e. Manager of the complimentary breakfast buffet at one hotel

Short Answer

Expert verified

Answer

Part a is a revenue center, parts b and c are classified into a profit center and parts d and e are considered as the cost center

Step by step solution

01

Explanation on manager of the Central Reservation Office

The Manager of the Central Reservation Office should be given the revenue center because the manager of the central reservation has the responsibility to generate the revenue for the organization.

02

Explanation on manager of various corporate-owned hotel locations

In this case, the managers of various corporate-owned hotel locations have full control over the operations of the business which means it will be classified under the categories of the profit center.

03

Explanation on managers of the Northeast and southeast corporate divisions

The Manager of the Northeast and southeast corporate divisions are having full control of their particular divisions and the operations of their divisions. So, this means it will be classified as a profit center.

04

Explanation on managers of the housekeeping department at one hotel

The managers of the housekeeping department at one hotel. In this case, they have the responsibility to control the costs, which means it will be classified as the cost center

05

Explanation on manager of the Complimentary breakfast buffet at one hotel

The Manager of the Complimentary breakfast buffet at one hotel also has the responsibility to control the cost which means it will be classified as the cost center for the business.

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Most popular questions from this chapter

Well-designed performance evaluation systems accomplish many goals. Describe the potential benefits performance evaluation systems offer.

Henderson Company manufactures electronics. The Calculator Division (an investment center) manufactures handheld calculators. The division can purchase the batteries used in the calculators from the Battery Division (another investment center) or from an outside vendor. The cost to purchase batteries from the outside vendor is \(5. The transfer price to purchase from the Battery Division is \)6. The Battery Division also sells to outside customers. The sales price is \(6, and the variable cost is \)3. The Battery Division has excess capacity.

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XTreme Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and inline skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sport: Snow Sports and Non-snow Sports. The following divisional information is available for the past year:

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