Two Divisions of Crowson Company (Divisions X and Y) Have

question 126

Multiple Choice

Two divisions of Crowson Company (Divisions X and Y) have the same profit margins.Division X's investment turnover is larger than that of Division Y (1.2 to 1.0) .Which of the following statements is true?

• A) Division Y will have a higher return on investment as it is using its assets more efficiently in generating sales.
• B) Division X will have a higher return on investment as it is generating more operating income.
• C) Division X will have a higher return on investment as it is using its assets more efficiently in generating sales.
• D) Division Y will have a higher return on investment as it is generating more operating income.

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Definitions:

Product Warranty Expense

Costs associated with the repair or replacement of defective products during the warranty period.

Product Warranty Payable

A liability account that represents the amount a company expects to pay to repair or replace products under warranty.

Matching Concept

A fundamental accounting principle that requires expenses to be recorded in the same period as the revenues they help generate.

Product Warranty Expense

The cost associated with repairing or replacing products under warranty, recognized by companies to cover future warranty claims.