Which of the following best describes the type of information that is most useful for managers in an expense center?

• A. Sales revenue figures for each product line
• B. Market share analysis
• C. Return on investment (ROI) calculations
• D. Detailed reports on actual expenses compared to budgeted expenses

Answer: (D)

Verified step by step guidance

1. Understand the concept of an expense center: An expense center is a division or department within an organization where the primary focus is on controlling costs rather than generating revenue. Managers in an expense center are responsible for monitoring and managing expenses to ensure they align with the budget.
2. Identify the type of information relevant to an expense center: Since the focus is on managing costs, the most useful information for managers would be detailed reports that compare actual expenses incurred to the budgeted expenses. This allows managers to identify variances and take corrective actions if necessary.
3. Eliminate irrelevant options: Sales revenue figures, market share analysis, and return on investment (ROI) calculations are not directly related to the primary function of an expense center. These metrics are more relevant to profit centers or investment centers where revenue generation and profitability are the focus.
4. Focus on the correct option: Detailed reports on actual expenses compared to budgeted expenses provide actionable insights for managers in an expense center. These reports help in tracking performance, identifying areas of overspending, and ensuring adherence to financial plans.
5. Conclude the reasoning: Managers in an expense center benefit most from information that helps them control and manage costs effectively. Therefore, the correct answer is 'Detailed reports on actual expenses compared to budgeted expenses.'