Which of the following statements regarding responsibility accounting systems is true! O Residual income is best used when evaluating the performance of profit centers rather than investment centers. An advantage of using return on investment to evaluate performance is that it encourages managers to increase both operating assets and operating income. O The use of residual income as a performance measure may lead segment managers to reject investments in projects that would be favorable for the company as a whole. Residual income is a less effective metric for evaluating performance if there are significant difference in the size of the operating segments. None of the above statements is true.

Which of the following statements regarding responsibility accounting systems is true! O Residual income is best used when evaluating the performance of profit centers rather than investment centers. An advantage of using return on investment to evaluate performance is that it encourages managers to increase both operating assets and operating income. O The use of residual income as a performance measure may lead segment managers to reject investments in projects that would be favorable for the company as a whole. Residual income is a less effective metric for evaluating performance if there are significant difference in the size of the operating segments. None of the above statements is true.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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