Reef Corphas Revenues of $500,000 Resulting in an Operating Income of of $54,000.Invested

question 26

Multiple Choice

Reef Corp.has revenues of $500,000 resulting in an operating income of $54,000.Invested assets total $600,000,and the cost of capital is 6%.Calculate the increase in residual income if sales increase by 10% and the profit margin and invested assets remain the same.

• A)$5,400
• B)$24,000
• C)$0
• D)$7,500

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Definitions:

Purely Competitive Producer

A producer in a market structure characterized by many small firms, homogeneous products, and free entry and exit, leading to zero economic profit in the long run.

Economic Profit

The differential amount left after subtracting all types of costs, both seen and unseen, from the total income.

Maximize Profit

The process or strategy of adjusting production and operation to achieve the highest possible return or profit.

Minimize Losses

Refers to the strategy of reducing the amount of money or resources wasted or not profitably used in a business or operation.