Detailed Answer
Answer (A) is correct. In a responsibility accounting system, managerial performance should be evaluated only on the basis of those factors directly regulated (or at least capable of being significantly influenced) by the manager. For this purpose, operations are organized into responsibility centers. Costs are classified as controllable and noncontrollable, which implies that some revenues and costs can be changed through effective management. If a manager has authority to incur costs, a responsibility accounting system will charge them to the manager’s responsibility center. However, controllability is not an absolute basis for establishment of responsibility. More than one manager may be able to influence a cost, and responsibility may be assigned on the basis of knowledge about the incurrence of a cost rather than the ability to control it.