The ABC Company has three divisions: A Division,B Division,and C Division. What was A Division's residual income last year?
A)$12,000.
B)$22,500.
C)$30,000.
D)$48,000.

Question

The ABC Company has three divisions: A Division,B Division,and C Division.  What was A Division's residual income last year?
A)$12,000. 
B)$22,500. 
C)$30,000. 
D)$48,000.

Quizplus · Accepted Answer

Residual income is calculated as the operating income of a division less a charge for the use of its assets. 
A Division's operating income was $60,000 and its charge for the use of assets was $48,000 (10% of its $480,000 asset base). 
Therefore, the residual income for A Division was $12,000 ($60,000 - $48,000).

The ABC Company Has Three Divisions: a Division,B Division,and C