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

You are required:

(a) to describe the main characteristics and objectives of profit centres and investment centres;

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

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

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