Suppose a Company Evaluates Divisional Performance Using Both ROI and Residual

question 90

True/False

Suppose a company evaluates divisional performance using both ROI and residual income.The company's minimum required rate of return for the purposes of residual income calculations is 12%.If a division has a residual income of $6,000,then its ROI is less than 12%.

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Definitions:

Functional Departmentation

Is grouping individuals by skill, knowledge, and action.

Grouping of Individuals

The organization or classification of people into groups based on shared characteristics, objectives, or interests.

Formalization

The extent to which an organization's procedures, policies, and rules are written and strictly followed.

Allowable Actions

Those actions or behaviors that are permitted within a given set of rules, regulations, or contexts.