Recreation Equipment Company Has Several Divisions That Are Investment Centers

question 54

True/False

Recreation Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here:
$$\begin{array} { | l | r | r | } \hline & \text { Boat Division } & \text { Trailer Division } \\\hline \text { Operating income } & \$ 70,000 & \$ 42,000 \\\hline \text { Total assets at Jan. 1 } & \$ 692,000 & \$ 233,000 \\\hline \text { Total assets at Dec. 31 } & \$ 700,000 & \$ 218,000 \\\hline\end{array}$$ With regard to the efficient use of assets,the Boat Division has a higher return on investment (ROI)because it has the highest operating income.

---

Definitions:

Marginal Rates of Substitution

The speed at which a buyer is prepared to sacrifice one item for another while keeping their satisfaction constant.

Bads

Are items that people do not desire to have, opposite to goods, which have a negative impact on utility when consumed.

Indifference Curves

Graphical representations in microeconomics showing different bundles of goods between which a consumer is indifferent.

Indifference Curves

Indifference Curves represent combinations of two goods that provide the consumer with the same level of satisfaction or utility, illustrating trade-offs in consumption choices.