Information for Two Divisions of Superb Entertainment Company Is Given

question 68

Essay

Information for two divisions of Superb Entertainment Company is given below:
\begin{array}{ll}&\underline{\text { Compact Disc } } &\underline{\text { DVD }} \\\text { Net income } & \$ 60,00 &\$100,000 \\\text {Capital investment } & \$400,000& \$500,000\\\\end{array}
a. If Superb Entertaiment Company charges each division $12 \%$ for capital employed, compute resudual income for the Compact Disc and DVD divisions.

b. Compute the ROI for each division.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit from the market, and products that are similar enough to be considered close substitutes, leading to price competition and efficiency.

Linear Marginal Cost

A situation where the additional cost of producing one more unit of output is constant, regardless of the quantity produced.

Sunk Costs

Expenses that have already been incurred and cannot be recovered or refunded.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance.