Conner Manufacturing Has Two Major Divisions

Multiple Choice

Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows:
Division 1:
Division 2:
Conner currently requires investments to meet a rate of return on asset investment of 5%. Which division has the greatest level of "residual income"?

A) Division 1
B) Division 2
C) Both divisions have the same return on investment ratio