‘Responsibility accounting is based on the application of the controllability principle.’

Required:
(a) Explain the ‘controllability’ principle and why its application is difficult in practice.
(b) Explain how the management of an organization can attempt to overcome the difficulties inherent in the practical application of the controllability principle.
(c) Explain the following approaches that can be used to set financial targets within an organization:
(i) Engineered approach
(ii) Historical approach
(iii) Negotiated approach.