-What Is Company A's Residual Income?
A) $9,000

question 39

Multiple Choice

$\begin{array}{l}\text { The following information is available on Company A: }\\\begin{array} { | l | r | } \hline \text { Sales } & \$ 900,000 \\\hline \text { Operating Income } & \$ 36,000 \\\hline \text { Shareholders' Equity } & \$ 100,000 \\\hline \text { Average Operating Assets } & \$ 180,000 \\\hline \text { Minimum Required Rate of Return } & 15 \% \\\hline\end{array}\end{array}$
-What is Company A's residual income?

• A) $9,000.
• B) $21,000.
• C) $24,000.
• D) $45,000.

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Definitions:

Break-Even Point

The level of sales or production at which a business's revenues exactly cover its expenses, leading to neither profit nor loss.

Variable Expenses

Costs that fluctuate in direct proportion to changes in activity level or volume, such as raw materials and direct labor costs.

Contribution Margin Ratio

The contribution margin ratio is a financial metric indicating the proportion of sales revenue that exceeds variable costs, expressed as a percentage.

Monthly Fixed Expenses

Regular expenses that do not vary in amount and are paid on a monthly basis.