EKPN Company Recorded the Following Operating Data What Is EKPN Company's Residual Income?
A)$2,200
B)($2,200)
C)($7,700)
D)($10,100)

question 8

Multiple Choice

EKPN Company recorded the following operating data: $$\begin{array} { l r } \text { Sales } & \$ 1,250,000 \\\text { Contribution margin } & 485,000 \\\text { Total direct fixed costs } & 400,300 \\\text { Total operating assets Jan. 1, 2016 } & 750,000 \\\text { Total operating assets Dec. 31, 2016 } & 790,000 \\\text { EKPN Company's desired return } & 12 \%\end{array}$$ What is EKPN Company's residual income?

• A)$2,200
• B)($2,200)
• C)($7,700)
• D)($10,100)

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Definitions:

Allocative Inefficiency

A situation where resources are not allocated efficiently, leading to a mismatch between what is produced and what consumers actually demand, causing wastage and loss of potential welfare.

Monopolistically Competitive

Refers to a market structure where many firms sell products or services that are similar but not perfect substitutes, with some ability to set prices.

Excess Capacity

The situation in which a firm or economy can produce more goods than are currently being produced, due to underused resources.

Diseconomies of Scale

Increases in cost per unit when output increases, often due to inefficiencies that arise with too large an operation.