Responsibility Accounting for Investment Centers

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RESPONSIBILITY ACCOUNTING FOR INVESTMENT CENTERS As explained earlier, an investment center manager can control or significantly influence the  investment funds available for use. Thus,  the primary basis for evaluating the performance of a  manager of an investment center is  return on investment (ROI) . The return on investment is  considered to be a useful performance measurement because it shows the  effectiveness of the  manager in utilizing the assets at his or her disposal . Return on Investment (ROI) The formula for computing ROI for an investment center, together with assumed illustrative data, is 
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Unformatted text preview: shown in Illustration 21-23 . Illustration 21-23 ROI formula Both factors in the formula are controllable by the investment center manager. Operating assets consist of current assets and plant assets used in operations by the center and controlled by the manager. Nonoperating assets such as idle plant assets and land held for future use are excluded. Average operating assets are usually based on the cost or book value of the assets at the beginning and end of the year....
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

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