Residual income is used as a performance measure in
A)profit centers.
B)cost centers.
C)investment centers.
D)revenue centers.

Question

Quizplus · Accepted Answer

Residual income is used as a performance measure in investment centers, as it evaluates the profitability of an investment after taking into consideration the cost of capital. It helps in determining whether the investment has generated sufficient returns to cover the cost of capital and contribute to the overall profitability of the organization. Profit centers are evaluated based on their overall profitability, revenue centers are evaluated based on their ability to generate revenue, and cost centers are evaluated based on their ability to control costs.

Residual Income Is Used as a Performance Measure in