A large organisation, with a well-developed cost centre system, is considering the introduction of profit centres and/or

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A large organisation, with a well-developed cost centre system, is considering the introduction of profit centres and/or investment centres throughout the organization, where appropriate. As manage- ment accountant, you will be providing technical advice and assistance for the proposed scheme. You are required:

(a) to describe the main characteristics and objec- tives of profit centres and investment centres; (4 marks)

(b) to explain what conditions are necessary for the successful introduction of such centres; (5 marks)

(c) to describe the main behavioural and control consequences which may arise if such centres are introduced; (4 marks)

(d) to compare two performance appraisal measures that might be used if investment centres are introduced. (4 marks)

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