ROI is computed by multiplying a margin times turnover as follows: The ROI measure is intended to

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ROI is computed by multiplying a margin times turnover as follows:

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The ROI measure is intended to motivate managers to make their divisions lean, efficient, and profitable. However, the exclusive use of ROI may motivate short-sighted decision making.

a. Provide two examples of how the margin component of ROI may be managed for short-term benefit with long-run consequences.

b. Provide two examples of how the turnover component of ROI may be managed for short-term benefit with long-run consequences.

c. How does the balanced scorecard approach reduce the incentive for managers to focus on activities that result in short-term benefits and long-term consequences?

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Managerial Accounting Information For Decisions

ISBN: 9780324222432

4th Edition

Authors: Thomas L. Albright , Robert W. Ingram, John S. Hill

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