Increasing return on investment (ROI) can be accomplished by a divisional manager by

decreasing investment in, say, an advertising budget.

decreasing sales by "shifting" the sale to another period (i.e., from December into January).

increasing costs by performing additional maintenance and repairs on machinery.

None of the above answersis correct.

Among the disadvantages of residual income is the following:

The residual income concept encourages a strategic (long-run) orientation which may or may not be advantageous in the short run.

Residual income provides an absolute measure of return, making it difficult to compare performances of company divisions.

Residual income re-focuses a manger on the dollar amount of income and away from myopia caused by using ROI only as a measure of performance.

A residual income concept removes all comparison of divisional managers and makes bonus allocation among them virtually impossible.