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

CIMA Stage 3 Management Accounting Techniques