Exhibit 11-1
Ashville Company Has Two Divisions - Bikes and Trikes

Multiple Choice

Exhibit 11-1
Ashville Company has two divisions - Bikes and Trikes.
$\begin{array}{c}\text { Ashville Company}\\\text { Segmented Income Statements}\\\text { For the Current Fiscal Year Ended December 31}\\\\\begin{array}{lrr}&\text { Bikes Division } & \text { Trikes Division }\\\text { Sales } & \$ 2,400,000 & \$ 1,000,000 \\\text { Cost of goods sold } & 1,400,000 & 530,000 \\ \text { Gross margin } & 1,000,000 & 470,000 \\\text { Allocated overhead (from corporate) } & 270,000 & 170,000 \\\text { Selling and administrative expenses } & 190,000 & 140,000 \\\text { Operating income } & 540,000 & 160,000 \\\text { Income tax expense (40\%) } & \mathbf{2 1 6 , 0 0 0} & \underline{64,000} \\\text { Net income } & \$ 324,000 & \$ 96,000\end{array}\end{array}$
-Refer to Exhibit 11-1.Assume the Trikes Division has average operating assets totaling $400,000 for the year and the company's cost of capital rate is ten percent.What is the residual income for the Trikes division?

A) $585,000
B) $1,380,000
C) $24,000
D) $120,000
E) None of the answer choices is correct.