One of Heartland Fabrication's foundational strategies is to hold managers accountable for results and reward those who meet goals. The incentive program is evaluated annually to ensure that employees are held responsible for goals that are controllable. If employees cannot control the factors that lead to meeting a goal, they are not held responsible.

In developing a system for responsibility accounting for division managers, the accounting team is evaluating several methods.

• Please Explain how the following methods evaluate performance:
  • return on investment
  • residual income
  • economic value added
  • return on sales
• Please explain and compare the methods' benefits and drawbacks; what would be the best method (or combination of methods) to use for the evaluation of division managers at Heartland Fabrication?