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

question 33

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: $\begin{array}{|l|lr|lr|}\hline & {\text { Retail Division }} & &{\text { Wholesale Division }} \\\hline \text { Operating income } & \$ & 2,500,000 & \$ & 6,000,000 \\\hline \text { Operating assets } & \$ & 16,000,000 & \$ & 36,000,000 \\\hline\end{array}$ 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:

Replace Defective

The process of substituting goods or services that are flawed or do not meet the contractual specifications.

Commercial Unit

A standard of goods or products that are considered as a single whole for purposes of sale and division, often relevant in transactions and legal contracts.

Bales of Hay

Bundles of hay that have been tightly bound with twine or wire and are used for feeding livestock or as agricultural mulch.

Accepted

Recognized as true or valid; in the context of contracts, to agree to the terms of an offer.