Terra Company Has Two Divisions, the Retail Division and the Wholesale

question 47

Multiple Choice

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: $\begin{array}{cc} & \text { Retall D1vislon }&\text { Wholesale} \\&&\text { Division}\\\text { Operating income } & \$ 2,500,000 &\$6,000,000\\\text { Operating assets } & \$ 16,000,000&\$36,000,000\end{array}$ Terra Company has set a target return on investment (ROI) of 15% for both divisions Which of the following statements is accurate?

• A) Residual income for the wholesale sales division was $100,000
• B) Residual income for the wholesale sales division was $600,000
• C) Residual income for the retail sales division was $600,000
• D) None of these.

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Definitions:

Cross-Price Elasticity

A measure of how the quantity demanded of one good responds to a change in price of another good, indicating substitutability or complementarity between products.

Mechanical Pencils

Writing instruments that use replaceable and mechanically extendable solid pigment cores, known as leads, to provide a consistent line width without the need for sharpening.

Felt-Tip Pens

Writing instruments that have a porous tip made of felt or similar materials, used for drawing or writing.

Cross-Price Elasticity

The degree to which the demand for one commodity reacts to alterations in the pricing of another commodity.