What is the responsibility of operating budget, Managerial Accounting

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What is the Responsibility of operating budget

when the operating budget of a firm is constructed in terms of responsibility areas it is called the responsibility budget shows the plan in terms of persons responsible for achieving them. It is used by the management as a control device to evaluate the performance of executives who are uncharged of various cost centers. Their performance is compared to the targets (budgets), set for them and proper action is taken for adverse results if any. The kinds of responsibility areas depend upon the size and nature of business activities and the organization structure. However responsibility areas may be classified under three broad categories:

Cost centre

Profit centre

Investment centre


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