The Excess of Divisional Income from Operations Over a Minimum

question 83

Multiple Choice

The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:

• A) profit margin
• B) residual income
• C) rate of return on investment
• D) gross profit

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Definitions:

Marginal Revenue Product (MRP)

The change in a firm’s total revenue when it employs 1 additional unit of a resource (the quantity of all other resources employed remaining constant); equal to the change in total revenue divided by the change in the quantity of the resource employed.

Total Revenue

The total amount of money received by a company from the sale of goods or services before any expenses are deducted.

Real Wages

The purchasing power of wages, adjusted for inflation, indicating the quantity of goods and services that can be bought.

Capital Equipment

Long-term assets used in the production of goods and services, such as machinery, buildings, and vehicles.