The Current Controllable Margin for Frederick Division Is $62,000

question 4

Multiple Choice

The current controllable margin for Frederick Division is $62,000. Its current operating assets are $200,000. The division is considering purchasing equipment for $60,000 that will increase annual controllable margin by an estimated $10,000. If the equipment is purchased, what will happen to the return on investment for Frederick Division?

• A) An increase of 16.1%
• B) A decrease of 13.3%
• C) A decrease of 3.3%
• D) A decrease of 7.2%

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Definitions:

Consumer Equilibrium

Consumer Equilibrium is the state where a consumer has balanced their expenditures across different goods to maximize total utility given their budget constraint.

Utility

In economics, the satisfaction or benefit derived from consuming a product or service.

Consumer Equilibrium

The point at which the amount of a product demanded by consumers equals the amount supplied, leading to a stable market price.

Utility Maximization

The process by which individuals choose consumption combinations that maximize their satisfaction or utility under given constraints.