One of Heartland Fabrication's foundational strategies is to hold managers accountable for results and reward those who meet goals. The incentive program is evaluated annually to ensure that employees are held responsible for goals that are controllable. If employees cannot control the factors that lead to meeting a goal, they are not held responsible.

In developing a system for responsibility accounting for division managers, the accounting team is evaluating several methods.

Explain how the following methods evaluate performance:

• return on investment
• residual income
• economic value added
• return on sales

Compare the methods' benefits and drawbacks, then provide your own recommendation on the best method (or combination of methods) to use to evaluate division managers at Heartland Fabrication.

Answer rating: 100% (QA)

1 Return on Investment ROI Evaluation of Performance ROI evaluates performance by comparing the divisions net income to the divisions invested capital ... View the full answer