Question

For each of the following organizational subunits, indicate the type of responsibility center that is most appropriate.

- A radio station owned by a large broadcasting network.

- An orange juice factory operated by a large orange grower.

Answer 1

1. A radio station owned by a large broadcasting network - Revenue centre

Reason - In a case of radio station, costs are known because the costs are similar and known. They are kind of fixed in nature. Revenues differ and are mainly focused. So, responsibility centre is most appropriate.

2. An orange juice factory operated by a large orange grower - Profit centre

Reason - Profit centre is more appropriate because it focuses both on costs and revenues. So for calculation of profit, both costs and revenues are to be tracked.