Question

Which of the following statements is false regarding performance measurement in Janthorn Company?

----In a well-designed balanced scorecard, financial performance measures should be integrated with non-financial measures.

----Because of operating leverage, an increase in unit sales ordinarily has the effect of increasing sales margin.

----Inspecting, moving, and queuing time add no value to the product and should be eliminated as much as possible.

----One major disadvantage of the return on investment approach is that it cannot be used to compare the performance of divisions of different sizes.

----Capital turnover measures the ability to generate revenue for each dollar invested in operating assets.

Which from above is FALSE?

Answer 1

4th statement is incorrect i.e. "One major disadvantage of the return on investment approach is that it cannot be used to compare the performance of divisions of different sizes:

Explanation:

The return on investment approach can be used to compare the performance of divisions of different sizes. It has nothing to do with the size of the division. It only takes into account the monetary factors such as Total Investment vis a vis total return. thereby, this approach can be used to compare the performance of divisions different in sizes. provided there, investment and return information is available