c. They are difficult to compare with other firms In a given industry, compariso
ID: 373133 • Letter: C
Question
c. They are difficult to compare with other firms
In a given industry, comparison of costs, revenues and profits are rather easier, if the firms are dealing in the similar kind of businesses. Further there are certain industry standards that are set as a benchmark in order to relate and evaluate the cost, revenues or profits of any given firm. Therefore, it not difficult to compare with other firms such variables and hence it is not a problem with cost, revenues or profits as performance measure. Instead, comparison with other firms is facilitated with the industrial standards.
Explanation / Answer
Which of the following is NOT a problem with using cost, revenues or profits as performance measures?
a.
It is difficult to attribute costs to various functional units
b.
Cost and profit information could be hidden or manipulated
c.
They are difficult to compare with other firms
d.
Weaknesses in functional areas are not identified
According to the text book, The problems associated with using cost cost, revenues, and profits are windfall profits and the difficulty in attributing cost, revenue, or profit contributions to the various functional units or underlying processes of the organization.
A is a problem so that would not be answer if I am correct.
However, the other three b,c, and d are not mentioned in the text book so I am not sure whether or not I understand the question well.
I would appreciate if anybody helps me. Thank you in advance
a.
It is difficult to attribute costs to various functional units
b.
Cost and profit information could be hidden or manipulated
c.
They are difficult to compare with other firms
d.
Weaknesses in functional areas are not identified
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