Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 10, Problem 4DQ
What is the major shortcoming of using operating income as a performance measure for investment centers?
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What is the primary disadvantage of utilizing revenue from operations to evaluate investment centers' performance?
In what ways might using ROI as a performance indicator for investment centers lead to poor decisions? How does the residual income strategy address this issue?
Please explain a major shortcoming of using income from
operations as a performance measure for investment centers.
Chapter 10 Solutions
Managerial Accounting
Ch. 10 - Differentiate between centralized and...Ch. 10 - Differentiate between a profit center and an...Ch. 10 - Prob. 3DQCh. 10 - What is the major shortcoming of using operating...Ch. 10 - In a decentralized company in which the divisions...Ch. 10 - How does using the return on investment facilitate...Ch. 10 - (a) Explain how return on investment might lead a...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - When using the negotiated price approach to...
Ch. 10 - Budgetary performance for cost center Vinton...Ch. 10 - Support department allocations The centralized...Ch. 10 - Prob. 3BECh. 10 - Profit margin, investment turnover, and ROI Briggs...Ch. 10 - Residual income The Commercial Division of Galena...Ch. 10 - Prob. 6BECh. 10 - Budget performance reports for cost centers...Ch. 10 - The following data were summarized from the...Ch. 10 - For each of the following support departments,...Ch. 10 - Prob. 4ECh. 10 - Service department charges In divisional income...Ch. 10 - Varney Corporation, a manufacturer of electronics...Ch. 10 - Horton Technology has two divisions, Consumer and...Ch. 10 - Rocky Mountain Airlines Inc. has two divisions...Ch. 10 - Championship Sports Inc. operates two divisionsthe...Ch. 10 - Prob. 10ECh. 10 - The operating income and the amount of invested...Ch. 10 - Prob. 12ECh. 10 - The condensed income statement for the Consumer...Ch. 10 - The Walt Disney Company (DIS) has four business...Ch. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Materials used by the Instrument Division of...Ch. 10 - Prob. 18ECh. 10 - GHT Tech Inc. sells electronics over the Internet....Ch. 10 - Profit center responsibility reporting for a...Ch. 10 - Prob. 3PACh. 10 - Effect of proposals on divisional performance A...Ch. 10 - Divisional performance analysis and evaluation The...Ch. 10 - Prob. 6PACh. 10 - Prob. 1PBCh. 10 - Prob. 2PBCh. 10 - Prob. 3PBCh. 10 - Prob. 4PBCh. 10 - Divisional performance analysis and evaluation The...Ch. 10 - Prob. 6PBCh. 10 - Prob. 1MADCh. 10 - Prob. 2MADCh. 10 - Papa Johns International, Inc. (PZZA), operates...Ch. 10 - Panera Bread Company (PNRA) operates over 2,000...Ch. 10 - Prob. 5MADCh. 10 - Prob. 1TIFCh. 10 - Prob. 2TIFCh. 10 - Prob. 3TIFCh. 10 - The three divisions of Yummy Foods are Snack...Ch. 10 - Prob. 5TIFCh. 10 - Prob. 1CMACh. 10 - Prob. 2CMACh. 10 - Prob. 3CMACh. 10 - Morrisons Plastics Division, a profit center,...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- What is the main drawback of using income from operations to measure the effectiveness of investment centers?arrow_forwardPlease describe a significant disadvantage of utilizing income from operations as a performance indicator for investment centers.arrow_forwardIn what way can the use of ROI as a performance measure for investment centers lead to bad decisions? What can be used to help overcome this problem?arrow_forward
- What is the most significant drawback of evaluating investment centers using ROI?arrow_forwardWhat is the investment center manager's preferred technique of calculating investment turnover, residual income, and return on investment? Why is it so popular? And why is the other not preferred? Briefly explain.arrow_forwardWhat are two disadvantages of ROI? Explain how each can lead to decreased profitability.arrow_forward
- Which of the following is a disadvantage of outsourcing? A. freeing up capacity B. freeing up capital C. transferring production and technology risks D. limiting ability to upsize or downsize productionarrow_forwardHow does a strategic performance measurement system improve upon an ordinary performance measurement system?arrow_forwardIdentify and explain the criticisms of using return on investment (ROI) as the onlyperformance measure.arrow_forward
- 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. O Residual income is a less effective metric for evaluating performance if there are significant differences in the size of the operating segments. O None of the above statements is true.arrow_forwardAnalyze the disadvantages of financial performance measures and the advantages of non-financial performance measures.arrow_forwardShow and contrast how return on investment and residual income are used to evaluate the performance of investment centers.arrow_forward
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