The Following Information Pertains to the Three Divisions of Zorro

question 103

Multiple Choice

The following information pertains to the three divisions of Zorro Company: What is the residual income for Division A?
$\begin{array}{lrrr} & \text { Division A } & \text { Division B } & \text { Division C } \\\text { Sales } & ? & ? & 1,250,000 \\\text { Net operating income } & \$ 40,000 & \$ 25,000 & \$ 75,000\\\text { Average operating assets } & 400,000 & ? & ? \\\text { Return on investment } & ? & 20 \% & 15 \% \\\text { Margin } & 0.10 & 0.05 & ? \\\text { Tumover } & 1.2 & ? & ? \\\text { Target ROI } & 14 \% & 12 \% & 10 \%\end{array}$

• A)($36,000)
• B)($16,000)
• C)$36,000
• D)$45,000

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Definitions:

Scarce Resources

Resources that are limited in availability and can run out if not used efficiently, leading to the necessity of making choices on how to allocate them.

Invisible Hand

A metaphor introduced by Adam Smith to describe the self-regulating nature of the marketplace.

Economic Prosperity

The state of flourishing, thriving, good fortune, and/or successful social status in terms of wealth, health, and happiness.

Incentives

Forms of motivation that aim to encourage people to perform actions or undertake activities by providing rewards or benefits.