Correll Company Has Two Divisions,A and B What Is the Residual Income for A?
A)$15,000
B)$25,000
C)$28,000

Multiple Choice

Correll Company has two divisions,A and B.Information for each division is as follows: $\begin{array}{lcc}& \underline{\text { A}}& \underline{\text { B}}\\\text { Net earnings for division } & \$ 40,000 & \$ 260,000 \\\text { Asset base for division } & \$ 100,000 & \$ 1,200,000 \\\text { Target rate of return } & 15 \% & 18 \% \\\text { Margin } & 10 \% & 20 \% \\\text { Weighted average cost of capital } & 12 \% & 12 \%\end{array}$ What is the residual income for A?

A) $15,000
B) $25,000
C) $28,000
D) $40,000