The Southern Division of WDY Corporation Reported Net Income of $2,500

question 123

Multiple Choice

The Southern Division of WDY Corporation reported net income of $2,500, operating income of $4,000, average equity of $24,000, and average operating assets of $30,000 in a recent accounting period. If Southern's required rate of return is 12%, its residual income was

• A) $380
• B) $(380)
• C) $400
• D) $1,100

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Definitions:

Strictly Convex Preferences

Preferences that demonstrate a consumer's increasing marginal rate of substitution, indicating a strong preference for diversified bundles of goods over homogeneous bundles.

Indifference Curves

Graphs representing different bundles of goods between which a consumer is indifferent, showing the combinations of goods that provide the same level of utility to the consumer.

Marginal Utility

The additional satisfaction or utility a consumer gains from consuming one more unit of a good or service.

Competitive Equilibrium Price Ratio

The ratio of prices that ensures the equality of supply and demand in a competitive market, often used to observe relative price changes between commodities.