The Purpose of Performance Measures Is to Set Direction and to Motivate

question 48

True/False

The purpose of performance measures is to set direction and to motivate managers.

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Definitions:

Residual Income

The income that remains after deducting all required expenses and cost of capital from operating income.

Investment Centers

Segments within a company for which managers have responsibility over cost, revenue, and investment decisions.

Cost Center

A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.

Responsibility Center

Any business segment whose manager has control over costs, revenues, or investments in operating assets.