Reference: 12-02
the Following Data Are Available for the South

Multiple Choice

Reference: 12-02
The following data are available for the South Division of Redride Products, Inc. and the single product it makes: $$\begin{array} { | l | l | } \hline \text { Unit selling price } & \$ 20 \\\hline \text { Variable cost per unit } & \$ 12 \\\hline \text { Annual fixed costs } & \$ 280,000 \\\hline \text { Average operating assets } & \$ 1,500,000 \\\hline\end{array}$$
-The Northern Division of the Smith Company had average operating assets totalling $150,000 last year. If the minimum required rate of return is 12% and if last year's net operating income at Northern was $20,000, then the residual income for Northern last year was?

A) $5,000.
B) $18,000.
C) $20,000.
D) $2,000.