A trading business operates multiple divisions under one management. Match each departmental accounting action on the left with its corresponding primary objective on the right.
- Comparing gross profit margins across individual sales divisionsEvaluating relative departmental efficiency
- Determining whether to discontinue a consistently loss-making divisionFacilitating decisions on segment closure or expansion
- Calculating performance bonuses for individual section heads based on profitsRewarding departmental managers accurately
- Tracking stock movements and inter-segment transfers between divisionsMaintaining effective operational and inventory control
Answer
Each departmental accounting action directly aligns with its specific management purpose: comparing gross margins evaluates relative departmental efficiency; determining whether to discontinue a unit facilitates segment closure or expansion decisions; calculating bonuses based on divisional profit rewards managers accurately; and tracking inter-segment transfers maintains effective operational and inventory control.
Departmental accounting provides internal financial visibility across distinct operational sections. Comparing profit margins shows relative operational efficiency across units. Analyzing unit profitability informs decision-making regarding closure or expansion. Determining individual segment net profit allows fair performance-based rewards for section managers. Finally, tracking inter-departmental transfers ensures proper control over inventory and internal resources.
Step-by-Step Solution
Key Concept
Objectives of Departmental Accounts