In designing an effective management control system for a multinational corporation, the accountant should measure factors appropriate for each unit's level of responsibility. Which of the following measures would be appropriate for evaluating the performance of an investment center?

Question

Quizplus · Accepted Answer

Residual income is the most appropriate measure for evaluating the performance of an investment center. Output on costs of input and EBIT are not as relevant as they do not consider the cost of capital employed in the investment center. Residual income measures the operating performance of an investment center after deducting a charge for the cost of invested capital.

In Designing an Effective Management Control System for a Multinational