If the Profit Margin Is 15

question 27

Multiple Choice

If the profit margin is 15.5% and investment turnover is 1.3 times,return on investment is:

• A) 1.3%
• B) 15.5%
• C) 20.2%
• D) 11.9%

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Definitions:

Negotiated Price Approach

An approach to transfer pricing that allows managers of decentralized units to agree (negotiate) among themselves as to the transfer price.

Transfer Price

The price at which divisions of a company transact with each other, such as the sale of goods or services, often used for budgeting and tax purposes.

Decentralization

The process of distributing or dispersing functions, powers, people, or things away from a central location or authority.

Operating Costs

Expenses associated with the day-to-day operations of a business, excluding the cost of raw materials and direct labor.