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

question 119

Multiple Choice

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


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What was A Division's residual income last year?

• A) 8%.
• B) 12%.
• C) 18%.
• D) 20%.

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Definitions:

Capitalism

An economic system characterized by private or corporate ownership of capital goods, investments determined by private decision, and prices, production, and the distribution of goods determined primarily by competition in a free market.

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A strand of Marxist theory that emphasizes culture and ideology's role in the capitalist system, originating in Western Europe.

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