Duncan Ltd Duncan Requires Each of Its Divisions to Generate a Minimum

question 138

Multiple Choice

Duncan Ltd.has the following information available for one of its divisions in the current year:
$\begin{array}{lr}\text { Sales revenue } & \$ 6000000 \\\text { Operating expenses } & 3800000 \\\text { Average operating assets } & 2000000\end{array}$
Duncan requires each of its divisions to generate a minimum return of 25 per cent.What is this division's residual income?

• A) $ 200 000
• B) $1 450 000
• C) $1 700 000
• D) $5 500 000

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Definitions:

Decision Making

The process of choosing among alternatives to achieve a goal or solve a problem.

Herfindahl-Hirschman Index

A measure used to determine the level of competition within a market, calculated based on the sum of the squares of market shares of all firms within the market.

Market

A place or system in which commercial transactions occur between buyers and sellers for goods, services, or financial assets.

Herfindahl-Hirschman Index

A measure of market concentration that is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.