Payne Company Reported the Following Information for the Current Year

question 18

Multiple Choice

Payne Company reported the following information for the current year: $\begin{array}{|l|lr|}\hline \text { Sales } & \$ & 1,600,000 \\\hline \text { Average Operating Assets } & \$ & 500,000 \\\hline \text { Desired ROI } & & 14 \% \\\hline \text { Net Income } & \$ & 85,000 \\\hline\end{array}$ The company's residual income was:

• A) $(15,000).
• B) $14,000.
• C) $15,000.
• D) $24,000.

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Definitions:

Chain-Weighted Index

An economic measure that accounts for changes in both prices and quantities of goods and services over time, adjusting the weightings to better reflect reality.

Laspeyres Index

A price index used to measure the change in the cost of acquiring a fixed basket of goods and services of the same type and quantity over time.

Paasche Index

A price index that measures the cost of purchasing a given market basket of goods and services in a certain year, compared to the cost of purchasing the same goods and services in a base year, with the quantities used in weighting the prices coming from the year of interest rather than the base year.

Ideal Cost-Of-Living Index

A theoretical measure that tracks the changes in the amount required to maintain a constant standard of living over a period.