Question

How is performance evaluated for an investment center?

1) Actual costs incurred compared to budgeted costs.
2) Actual segment margin compared to budgeted segment margin.
3) Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.
4) None of these.

Answer 1

Performance in an investment center is evaluated through the comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.

Step-by-step explanation:

Performance in an investment center is evaluated through the comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment. This means assessing the actual segment margin and comparing it to the budgeted segment margin, as well as comparing the actual and budgeted ROI based on the assets controlled by the segment.

Option 3) Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment is the correct answer for how performance is evaluated in an investment center.