In Order to Avoid Suboptimization, Many Companies Prefer to Evaluate

question 42

Multiple Choice

In order to avoid suboptimization, many companies prefer to evaluate their investment centers using

• A) Return on investment instead of residual income.
• B) Residual income instead of return on investment.
• C) Gross margin instead of contribution margin.
• D) Sales instead of income.

---

Definitions:

Red Beryl

A rare mineral that is red in color and is composed of beryllium, aluminum, and silicate.

Monopoly Power

The ability of a single seller in a market to control the prices of goods or services, usually due to lack of competition.

Local Water Company

A utility firm responsible for the supply and management of water within a specific local area.

Natural Monopoly

A market structure where a single firm can provide a product or service at a lower cost than any potential competitor, often due to economies of scale.