1985, Inc. operates three geographic regions: The Color Purple, The Goonies, and The Breakfast Club. Each region is considered an investment center for 1985. The following data was reported for the year just ended: The Color Purple The Goonies The Breakfast Club Operating Income Sales Revenue Invested Assets $23,600 $16,160 $5,020 $7,790 $3,050 $1,970 $29,962 $15,482 $15,335 Assume the company's minimum acceptable rate of return is 12%. An investment opportunity requiring a $10,000 investment has been identified by the company. The nvestment is expected to earn $1,250. Which of the following statements is correct? If the managers of each region receive a bonus based on their ability to exceed their region's prior period ROI, all managers would accept the investment opportunity. If the investment opportunity is accepted by any of the managers, their region's residual increase will increase by $50. Using ROI as the performance evaluation tool would ensure goal congruence is achieved.

1985, Inc. operates three geographic regions: The Color Purple, The Goonies, and The Breakfast Club. Each region is considered an investment center for 1985. The following data was reported for the year just ended: The Color Purple The Goonies The Breakfast Club Operating Income Sales Revenue Invested Assets $23,600 $16,160 $5,020 $7,790 $3,050 $1,970 $29,962 $15,482 $15,335 Assume the company's minimum acceptable rate of return is 12%. An investment opportunity requiring a $10,000 investment has been identified by the company. The nvestment is expected to earn $1,250. Which of the following statements is correct? If the managers of each region receive a bonus based on their ability to exceed their region's prior period ROI, all managers would accept the investment opportunity. If the investment opportunity is accepted by any of the managers, their region's residual increase will increase by $50. Using ROI as the performance evaluation tool would ensure goal congruence is achieved.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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