Evaluating Segments Based on the Segment's Return on Investment Will

question 81

Multiple Choice

Evaluating segments based on the segment's return on investment will

• A)encourage each segment's manager to select only projects that are above the company's current return on investment.
• B)encourage each segment's manager to only select projects that are above the individual segment's current return on investment.
• C)encourage each segment's manager to select only projects below the company's required rate of return.
• D)encourage managers to select only projects below the segment's cost of capital.

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Definitions:

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, used as a measure of performance in variance analysis.

Actual Rate

The actual interest rate or return that is earned or paid on an investment, loan, or other financial product.

Standard Rate

A predetermined or fixed cost rate that is applied uniformly across units, activities, or time for budgeting or billing purposes.

Unfavorable Cost Variance

A variance that occurs when the actual cost exceeds the standard cost.