A fully-owned subsidiary of a multinational company reports its return on investment (ROI) periodically during the year. This unit of the company, for performance evaluation purposes, is likely considered a(n):
A) Profit center.
B) Revenue center.
C) Cost center.
D) Operating center.
E) Investment center.

Question

Quizplus · Accepted Answer

A fully-owned subsidiary of a multinational company that reports its ROI periodically during the year is likely considered an investment center. An investment center is responsible for generating a return on the assets allocated to it, and its performance is measured primarily by its ROI. This center has control over both the expenses that it incurs and the revenue that it generates, making it a good choice for performance evaluation purposes. The other options, such as profit center, revenue center, cost center, or operating center, all have limited control over their expenses and/or revenue, making them less suitable for evaluating overall performance in terms of ROI.

A Fully-Owned Subsidiary of a Multinational Company Reports Its Return