The type of center that is evaluated on the basis of residual income is a(n):

Question

Quizplus · Accepted Answer

An investment center is evaluated on the basis of residual income, which is the operating income earned by the center minus the minimum acceptable rate of return multiplied by the investment in the center. This approach measures how much value the center has created above and beyond its cost of capital. Profit centers are evaluated on the basis of operating income, revenue centers on the basis of revenue, and cost centers on the basis of expenses.

The Type of Center That Is Evaluated on the Basis