The Labrador Falls Company Has Three Divisions: a Division, B

question 42

Multiple Choice

The Labrador Falls Company has three divisions: A Division, B Division, and C Division.
$\begin{array}{lcc}&\text {A}&\text {B}&\text {C}\\\text { Sales } & \$ 320,000 & \$ 540,000&?\\\text { Net operating income } & 60,000 & ?&\$24,000 \\\text { Residual income } & ? & 36,000&14,400 \\\text { Average Division Assets } & ? & ?&80,000 \\\text { Cost of Capital } & 12 \% & 16 \%&? \\\text { Profit Margin } & 20 \% & 5 \%&? \\\text { Asset Turnover } & ? & 4.0 &?\\\text { Return investment } & 15 \% & ?&?\end{array}$

-
What was A Division's residual income last year?

• A) $12,000.
• B) $22,500.
• C) $30,000.
• D) $48,000.

---

Definitions:

Liquid and Riskless

Refers to assets that can be easily converted to cash without significant loss of value and carry minimal risk of loss.

Board of Governors

The leading body of a central bank or other regulatory institution, responsible for overseeing the management and operations.

Fed

Short for the Federal Reserve, which is the central banking system of the United States responsible for monetary policy.

District Banks

Components of the Federal Reserve System, each serving a specific geographic area in the United States, involved in banking regulation and policy implementation.