Selected Data from Chering Division's Accounting Records Revealed the Following

question 43

Multiple Choice

Selected data from Chering Division's accounting records revealed the following:
$\begin{array}{lcc}\text { Sales } & \$ 825,000 \\\text { Average investment } & \$ 440,000 \\\text { Net operating income } & \$ 66,000 \\\text { Minimum rate of return (divisional cost of capital) } & 14 \%\end{array}$ Chering Division's residual income (RI) is:

• A)$4,400.
• B)$8,800.
• C)$9,240.
• D)$22,380.
• E)$49,500.

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Definitions:

Hail Insurance

A type of insurance policy specifically designed to protect crops from hail damage.

Total Product

The total quantity of output produced by a firm over a given period of time.

Marginal Product

The extra production generated when one more unit of a particular input is added, with all other inputs remaining unchanged.

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.