Which of the following responsibility centers may be evaluated on the basis of residual income?
A)investment center
B)revenue center
C)profit center
D)cost center

Question

Quizplus · Accepted Answer

Investment centers are evaluated based on residual income, which measures the center's profitability after deducting a charge for the capital it has employed. Residual income is the excess of operating income over a required rate of return on invested assets. Revenue centers are evaluated based on their ability to generate revenue, whereas profit centers are evaluated based on their ability to generate profit. Cost centers are evaluated based on their ability to minimize costs.

Which of the Following Responsibility Centers May Be Evaluated on the Basis