Quiz 11: Performance Measurement in Decentralized Organizations

Business

1)Use the following formula: img 2)Use the following formula: img 3)Use the following formula: img

In a decentralized organization, decision-making authority isn't confined to a few top executives, but rather is spread throughout the organization with lower-level managers and other employees empowered to make decisions.

Calculate residual income: The following steps are involved in calculation of residual income: 1. Multiply the minimum return required with average operating asset. 2. Deduct above calculated amount from net operating income. The following information is given: Net operating income = $400,000 Average operating assets = $ 2,200,000 Minimum rate of return = 16% Step 1: img Step 2: Residual income is calculated as follows: img img

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