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ABC residual income; Transfer pricing; Responsibility ROI

1) ABC Inc. has the following information available for one of its divisions:

Average operating assets
$5,000,000
Return on investment (ROI)
40%
Sales
$8,000,000

If ABC requires a minimum return on its investments of 25%, what is their residual income?

A)$1,950,000

B)$4,500,000

C)$6,750,000

D)$750,000

2) "Transfer pricing" refers to:

A) the price charged when a company sells to its employees.

B) the price charged when a company sells to its customers.

C) the price charged when one division sells to another division.

D) the price charged when a company sells to a stockholder.

3) Which type of manager would most likely be held responsible for the return on investment (ROI) of his segment?

A) Investment center

B) Profit center

C) Cost center

D) Revenue center

Solution Summary

Comments are next to choice and wrong responses so you know why the one is right and why the others are wrong.

$2.19