Final answer:
Residual income allows managers to focus on maximizing earnings beyond a minimum required ROI, aiding long-term production and profit maximization decisions.
Step-by-step explanation:
The concept that allows managers to focus their attention on maximizing an amount of earnings above a minimum required return on investment (ROI) is known as residual income.
Residual income is a managerial accounting tool used to measure the excess of actual operating income that a company generates above its minimum required return, based on its operating assets. It encourages managers to make decisions that will maximize the company's overall value.
Every firm, such as the hypothetical Authentic Chinese Pizza company, can determine its profit-maximizing level of output by analyzing both its costs, including fixed and variable components, and its revenue-generating strategies, considering the market structure it operates within.
It's important to comprehend the cost structure for long-run production decisions which entail strategic pricing and output levels that align with the goal of maximizing residual income.
The correct answer is 3) Residual income.