The d Division of tefany Company had the following financial data for the year

Responsibility Acctng

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Responsibility Acctng

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The d Division of tefany Company had the following financial data for the year

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Which of the following responsibility center may be evaluated on the basis of residual income?

The investment center will most likely be evaluated using the residual income. Residual income helps evaluate investments using the common cost of capital rate among all the responsibility centers.

What can be said if a division generates a positive residual income?

A positive residual income would indicate that a division's ROI was lower than the minimum required rate of return for the division. ROI used alone as a performance measure discourages managers from accepting all investment decisions that will benefit the company as a whole.

Has established a target rate of return of 16% for all divisions?

Texas Company has established a target rate of return of 16% for all divisions. For the most recent year, San Marcos Division generated sales of $10,000,000 and expenses of $7,500,000. Total assets at the beginning of the year were $5,000,000 and total assets at the end of the year were $7,000,000.