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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

What is the major shortcoming of using income from operations as a performance measure for investment centers?

To determine

Investment center: A department or unit or division of a corporation where its manager is assigned the responsibility of costs, revenues, and resources invested in assets, is referred to as investment center.

To identify: The major shortcoming for an investment center, if income from operations is used as its performance measure.

Explanation

Investment center is delegated with the responsibility of costs, revenues, and resources invested in assets in the division. Therefore, income from operations, return on investment, and residual incom...

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