1. Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%.

The profit margin for Chicks is:

a) 25%

b) 22%

c) 15%

d) 27.5%

2. Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the:

a) Cost price approach

b) Negotiated price approach

c) Revenue price approach

d) Market price approach

3. 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

4. Assume that Division J has achieved income from operations of $165,000 using $900,000 of invested assets. If management desires a minimum rate of return of 11%, the residual income is:

a) $99,000

b) $18,150

c) $264,000

d) $66,000

5. A factor in determining the rate of return on investment--the ratio of income from operations to sales--is called:

a) Profit margin

b) Indirect expenses

c) Investment turnover

d) Cost