One of Heartland Fabrication's foundational strategies is to hold managers accountable for results and reward those who meet goals. The incentive program is evaluated annually to ensure that employees are held responsible for goals that are controllable. If employees cannot control the factors that lead to meeting a goal, they are not held responsible.

In developing a system for responsibility accounting for division managers, the accounting team is evaluating several methods.

• Explain how the following methods evaluate performance:
  • return on investment
  • residual income
  • economic value added
  • return on sales
• Compare the methods' benefits and drawbacks, then provide your own recommendation on the best method (or combination of methods) to use for evaluation of division managers at Heartland Fabrication.