34. A division’s after-tax cash operating income less depreciation and less an imputed cost of
capital is called its:
35. Return on Investment (ROI), though widely used, is subject to which one of the following
limitations?
36. All of the following are possible transfer pricing methods used in practice except:
37. Which one of the following establishes an “arm’s-length price” by using the sales prices
of similar products made by unrelated firms?
38. Which one of the following transfer pricing alternatives is based on determining an
appropriate markup, where the markup is based on gross profits of unrelated firms selling similar
products?
39. Which one of the following determines the transfer price based on the seller’s costs, plus
a gross profit percentage determined from comparison of sales of the seller to those of unrelated
parties?
40. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000 3,000,000
The return on investment (ROI) for Division X is:
41. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000
3,000,000
The return on investment (ROI) for Division Y is:
42. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000
3,000,000
The return on investment (ROI) for Division Z is:
43. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000 3,000,000
The return on sales (ROS) for Division X is:
44. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000
3,000,000
The return on sales (ROS) for Division Y is:
45. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000
3,000,000
The return on sales (ROS) for Division Z is:
46. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000 3,000,000
The asset turnover (AT) for Division X is (rounded):
47. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000
3,000,000
The asset turnover (AT) for Division Y is calculated to be (rounded):
48. Consider the following data for three divisions of a company, X, Y, and Z:
Divisional: X Y Z
Sales $1,800,000 $900,000 $4,800,000
Operating Income 252,000 108,000 240,000
Investment in assets 630,000 540,000
3,000,000
The asset turnover (AT) for Division Z is:
49. Consider the following data from two divisions of a company, P and Q:
Divisional P Q
Sales $1,500,000 $1,000,000
Operating Income $600,000 $450,000
Investment $4,000,000 $2,750,000
If the minimum rate of return is 11%, what is Division P’s residual income (RI)?
50. Consider the following data from two divisions of a company, P and Q:
Divisional P Q
Sales $1,500,000 $1,000,000
Operating Income $600,000 $450,000
Investment $4,000,000 $2,750,000
If the minimum rate of return is 11%, what is Division Q’s residual income (RI)?
51. Consider the following data from two divisions of a company, P and Q:
Divisional P Q
Sales $1,500,000 $1,000,000
Operating Income $600,000 $450,000
Investment $4,000,000 $2,750,000
If both divisions were presented with an opportunity to invest in a project that is estimated to
achieve an ROI of 15%, what will the units likely decide?
52. Selected data from Chering Division’s accounting records revealed the following:
Sales $825,000
Average investment $440,000
Net operating income $66,000
Minimum rate of return (divisional cost of capital) 14%
Chering Division’s return on investment (ROI) is:
53. Selected data from Chering Division’s accounting records revealed the following:
Sales $825,000
Average investment $440,000
Net operating income $66,000
Minimum rate of return (divisional cost of capital) 14%
Chering Division’s return on sales (ROS) is:
54. Selected data from Chering Division’s accounting records revealed the following:
Sales $825,000
Average investment $440,000
Net operating income $66,000
Minimum rate of return (divisional cost of capital) 14%
Chering Division’s asset turnover (AT) is calculated to be:
55. Selected data from Chering Division’s accounting records revealed the following:
Sales $825,000
Average investment $440,000
Net operating income $66,000
Minimum rate of return (divisional cost of capital) 14%
Chering Division’s residual income (RI) is: