Assume That Divisional Operating Income Amounts to $325,000 and Top

question 35

Multiple Choice

Assume that divisional operating income amounts to $325,000 and top management has established 10% as the minimum rate of return on divisional assets totaling $1,250,000.The residual income for the division is:

• A) $200,000.
• B) $292,500.
• C) $125,000.
• D) $0.

---

Definitions:

Variable Costs

Expenses that vary directly with the amount of production or business activity.

Fixed Costs

Costs that do not change with the level of output or production, such as rent or salaries.

Average Fixed Costs

The total fixed costs of production divided by the number of units produced, showing how fixed costs per unit change with production levels.

Output Decreases

A reduction in the amount of goods or services produced by a company or economy over a specific period.