COST ACCOUNTING
PERFORMANCE MEASUREMENT
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]


(Operating profit ÷ Cost ) x 100


(Operating profit ÷ Investment) x 100


(Operating profit ÷ Revenue) x 100


(Operating profit ÷ Sales) x 100

Detailed explanation1: The most common is net income divided by the total cost of the investment, or ROI = Net income / Cost of investment x 100.
Detailed explanation2: Return on investment (ROI) is calculated by dividing the profit earned on an investment by the cost of that investment. For instance, an investment with a profit of $100 and a cost of $100 would have an ROI of 1, or 100% when expressed as a percentage.
Detailed explanation3: ROI equals net operating income divided by average operating assets times 100. For example, if your small business has $30, 000 in net operating income and $100, 000 in average operating assets, your ROI would be $30, 000 divided by $100, 000 times 100, which is 30 percent.
Detailed explanation4: In the simpleinterest formula I = Prt, the variable I stands for the interest on the original investment, P stands for the amount of the original investment (called the “principal"), r is the interest rate (expressed in decimal form), and t is the time. For annual interest, the time t must be in years.
Detailed explanation5: The term “percent” means “per 100” so 1000% is 1000/100 = 10. Thus if one invests $4000.00 and makes 1000% then the return would be 10*$4000.00 = $40 000.00.