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

question 36

Multiple Choice

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

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

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