Which of the Following Is True About Return on Investment

question 102

Multiple Choice

Which of the following is true about return on investment (ROI) ?

• A) It is generally used to evaluate the short-term financial performance of profit centers.
• B) Its use can motivate suboptimal decision making on the part of subunit managers.
• C) It is defined as the difference between some measure of "profit" and an imputed charge for use of assets by the subunit whose performance is being evaluated.
• D) When inflation is low, it approximates the amount of economic income that a subunit generates.
• E) It generally cannot be used to compare the financial performance of one unit in an organization to other units in that organization.

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Definitions:

Actual Output

The real quantity of goods or services produced by a company during a specific period.

Labor Efficiency Variance

A measure in managerial accounting that compares the actual hours worked to the standard hours planned for a process, indicating efficiency in labor usage.

Labor Rate Variance

The difference between the actual labor costs incurred and the expected (or standard) labor costs for the production achieved.

May

Not a term that needs defining within the given context.