Responsibility Accounting Transfer Pricing(ppt 34页)

Controlling the Rate of Return：
-Regal’s  manager was able to increase sales to $600,000 which increased net operating income to $42,000.
-There was no change in the average operating assets of the segment.
Criticisms of ROI：
-In the absence of the balanced scorecard, management may not know how to increase ROI.
-Managers often inherit many committed costs over which they have no control.
-Managers evaluated on ROI may reject profitable investment opportunities.
Criticisms of ROI：
      As division manager at Winston, Inc., your compensation package includes a salary plus bonus based on your division’s ROI -- the higher your ROI, the bigger your bonus.
     The company requires an ROI of 15% on all new investments -- your division has been producing an ROI of 30%.
     You have an opportunity to invest in a new project that will produce an ROI of 25%.