Performance Evaluation of Business Units


After reading this chapter, you should be able to answer the following questions:

images How has the change to multidivisional organizations impacted the way performance is evaluated within organizations?

images How can return on investment, residual income, and economic value added be used to assess the performance of company divisions?

images Should corporate-level costs be included in the evaluation of a business unit's performance?

images Why is it important to use more than just financial measures of performance?

images How can transfer pricing be used to help motivate managers of divisionalized organizations to work cost-effectively and competitively?

In today's business environment, we have seen a shift toward a decentralized, multidivisional business structure. The measurement and management of divisional (i.e., business unit) performance has, therefore, influenced the development of management accounting. This chapter introduces the structure ...

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