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Manager vs investment center: performance evaluation

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Explain why distinguishing between investment centers and their managers is important in performance evaluations.

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Solution Summary

This solution is 253 words and explains that there are two reasons to evaluate, one for owners to see how the project is doing and another to see how the manager is doing. This difference is explained with examples.

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Investment centers are evaluated based on the profits generated and assets employed. This is to see if the aggregate project is still performing.

The manager, however, may not have control over what assets are associated with the investment center and may not have control over all the costs. For instance, when evaluating managers, a business may omit goodwill from the asset based because the manager cannot control the fact that the plant was ...

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