In what way can the use of ROI as a performance measure for investment centers lead to bad decisions? How does the residual income approach overcome this problem?

Q: Explain the differences and similarities between Return on Investment (ROI) and Residual Income (RI)

A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…

Q: Identify and explain the criticisms of using return on investment (ROI) as the onlyperformance…

A:

Q: Which of the following is a limitation of using past performance as a basis for judging actual…

A: 2. It assumes inefficiencies of previous periods without considering possible efficiencies of the…

Q: What is the biggest disadvantage of using ROI to evaluate investment centers?

A: Return on Investment: Under return on Investment, the investment opportunity with the highest rate…

Q: Create an example showing how residual income is calculated. What information is used in computing…

A: Return on investment (ROI):   Return on investment evaluates how efficiently the assets are used in…

Q: Which of the following is NOT true about the cause-and-effect criterion when estimating a cost…

A: The cause and effect analysis is one of the factors for making cost allocation decisions. The cost…

Q: What is return on marketing investment (rOMI)? howdoes considering marketing as an investment…

A: Return on marketing expenditure, or ROMI, is an indicator utilized to evaluate the success of a…

Q: Using the concept of substitution and income effect, explain why means-tested transfer programs…

A: The income effect  is basically the shift in consumer consumption of items as a result of  income…

Q: Which of the following is not an underlying assumption of a conventional CVP analysis? Multiple…

A: Cost-volume-profit analysis is the most important tool that is used by managers to specify the cost…

Q: What does it mean to use the DuPont model to help explain a decrease in ROI?

A: Introduction: DuPont analysis is done to find out the various drivers that account for the return on…

Q: Most organizations use residual income instead of return on investment (ROI) as a performance…

A: The Following statement is True because Residual Income is much better than Return on Investment…

Q: Which of the following statement(s) is/are not true?

A: Return on investment is return earned in term of percentage of average assets employed.

Q: computing ROI,

A: In computing ROI, land held for future use Correct Answer Is A  considered a nonoperating asset.

Q: Why does the high cost of the system negatively impact the organization's bottom line?

A: The question is based on the concept of bottom line of a company and its relationship with high cost

Q: Why is there typically a rise in ROI or residual income across time in a division? What undesirable…

A: Return on investment (ROI):   This financial ratio evaluates how efficiently the assets are used in…

Q: What is the fundamental flaw in utilizing income from operations as a success metric for investment…

A: Introduction: Investment centers are companies that make investments to boost their profits.

Q: Which of the following statements about CVP analysis is false? a. Operating income calculations in…

A: The answer for the multiple choice question and relevant explanation are presented hereunder :

Q: What is the primary disadvantage of utilizing revenue from operations to evaluate investment…

A: Investment centers are businesses that invest in other companies to boost their profits.

Q: What variable affecting gross profit should the manager focus his attention? Why?

A: Gross Profit is the profit arrived at by deducting cost of goods sold from the turnover or the…

Q: Which of the following is a disadvantage of outsourcing? Group of answer choices A. freeing up…

A: A very common outsourcing scenario is the decision of a company to produce a component that is…

Q: What does it mean when ROI has decreased even though net income hasincreased?

A: Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in…

Q: When making decisions, managers should consider a. revenues that differ between alternatives. b.…

A: The explanation for the given options:   a. A manager on the verge of making decisions must consider…

Q: Monopolists sometimes practice price discrimination to O a. get rid of surplus product. O b,…

A: Correct answer:Option d:Increase profit

Q: What factors affecting ROI does the DuPont method of protability analysis highlight?

A: Return on Investment (ROI): It is an accounting measure of income divided by an accounting measure…

Q: What is a major shortcoming of just using Income from Operations as a performance measure for…

A: Income from operations states the results of deducting the operating expenses from the gross profit.…

Q: What is the major shortcoming of using income from operations as a performance measure for…

A: Investment centre are who do investment of organisation to increase income.

Q: ROI based on the gross book value of assets

A: ROI indicates the profitability of the investment made. It is the measure of net income in relation…

Q: Residual income is better measure for performance evaluation of an investments center manager than…

A: Correct Option is 2nd - Desirable investments decisions will not be neglected by high-return…

Q: return

A: The term profitability refers to metric which is used to measure profits. An analysis is made on how…

Q: What is the major shortcoming of using income from operations as a performance measure for…

A: Investment center: A department or unit or division of a corporation where its manager is assigned…

Q: Why might a manager exhibit a behavioral tendency to inappropriately consider sunk costs in making a…

A: Sunk Costs: Sunk costs are those costs incurred in the past and it cannot be changed unless if any…

Q: What profit-based pricing approach should a manager use if he or she wants to reflect the percentage…

A: Profit grounded pricing strategy is the approach which involves setting the prices for the product…

Q: osts and long-run average costs? Explain the association between return to scale and economies of…

A: Economies of scale: This term refers to the cost advantage that a firm will gain as a result of a…

Q: What factors affecting ROI does the DuPont method of profitability analysis highlight?

A: DuPont method of Profitability Analysis: According to DuPont method of Profitability Analysis,…

Q: key flaw in utilizing income from operations as a performance indicator for investment centers

A: Performance indicator means the factors used to analyze the operations of a business.

Q: Why have some described the reported savings in cost-avoidance measures as “soft,” “funny money,”…

A: The company using the process to reduces the cost that increases the profit is known as cost…

Q: Please explain a major shortcoming of using income from operations as a performance measure for…

A: Invesment centers are those units or organisations that a business will utilise its capital to…

Q: What is meant by the terms margin and turnover in ROI calculations?

A: ROI( Return on investment) is a performance measure used to measure the efficiency of an…

Q: In what way can the use of ROI as a performance measure for investment centers lead to baddecisions?

A: Return On Investment (ROI): It is a measure on the amount of return on a particular investment with…

Q: Which of the following is not an assumption underlying cost-volume-profit analysis?

A: Cost Volume Profit analysis- This analysis helps in understanding the cost and profit based on the…

Q: Which of the following should be used to compute the sales mix so that the break-even computation is…

A: In the case of a multiproduct firm, it is essential to calculate the weighted average contribution…

Q: Which of the following is not a measure that management can use in evaluating and controlling…

A: The investment centers are typically very large divisions of a company. Investment center managers…