Average operating assets is used in the numerator to compute turnover in an ROI

Average operating assets is used in the numerator to

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9.Average operating assets is used in the numerator to compute turnover in an ROI analysis. AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBlooms: RememberDifficulty: 1 EasyLearning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales; expenses; andassets affect ROI. 10.Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is greater than 12%. AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales; expenses; andassets affect ROI.Learning Objective: 11-02 Compute residual income and understand its strengths and weaknesses. 11.Return on investment is superior to residual income as a means of measuring performance because it encourages managers to make investment decisions that are more consistent with the interests of the company as a whole. AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBlooms: RememberDifficulty: 1 EasyLearning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales; expenses; andassets affect ROI.Learning Objective: 11-02 Compute residual income and understand its strengths and weaknesses.12.ROI and residual income are tools used to evaluate managerial performance in profit centers. AACSB: Reflective Thinking
AICPA BB: Critical ThinkingAICPA FN: MeasurementBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales; expenses; andassets affect ROI.Learning Objective: 11-02 Compute residual income and understand its strengths and weaknesses. 13.Residual income is the net operating income that an investment center earns above the minimum required return on the investment in fixed assets. AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 11-02 Compute residual income and understand its strengths and weaknesses. 14.Residual income should not be used to evaluate a profit center. AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBlooms: UnderstandDifficulty: 2 Medium Learning Objective: 11-02 Compute residual income and understand its strengths and weaknesses.

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