Final answer:
ROI is accurately tracked by analyzing revenue and cost data through a cost/benefit analysis, differentiating between various cost types and evaluating potential rates of return on projects.
Step-by-step explanation:
ROI (Return on Investment) is properly tracked by analyzing revenue and cost data. This involves a decision-making process where you compare the costs against the benefits. In a cost/benefit analysis, one side of the T-shaped chart details the costs, which include money, effort, and other sacrifices made. On the opposite side are the benefits reaped from the decision, such as financial gain, time saved, experience obtained, and other improvements.
Considering the case of Big Drug Company, economists and scientists evaluate potential R&D projects to estimate the rates of return, which is the expected payoff from each project. Understanding the differentiation of total costs into fixed cost, marginal cost, average total cost, and average variable cost provides insightful data for the firm and aids in tracking ROI accurately.