Two Divisions of Oregano Company (Divisions TX and OY) Have

question 43

Multiple Choice

Two divisions of Oregano Company (Divisions TX and OY) have the same profit margins. Division TX's investment turnover is larger than that of Division OY (1.2 to 1.0) . Operating income for Division TX is $55,000, and operating income for Division OY is $43,000. Division TX has a higher return on investment than Division OY by

• A)using operating income as a performance measure
• B)comparing the profit margins
• C)applying a negotiated price measure
• D)using its assets more efficiently in generating sales

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Definitions:

FIFO Cost Flow

A method used in accounting for inventory valuation where the first goods purchased are the first goods sold, standing for First-In, First-Out.

Finished Goods Inventory

Goods that have been fully manufactured but remain unsold or undistributed to purchasers.

Cost Of Goods Sold

The immediate expenses linked to the manufacturing of products a company sells.

Product Costs

The costs directly attributable to the manufacturing of a product, including direct labor, direct materials, and manufacturing overhead.