34

Refer to Exhibit 11-1. Assume the Trikes Division has average operating assets totaling $400,000 for the year and the company's cost of capital rate is ten percent. What is the residual income for the Trikes division?

		$585,000
		$1,380,000
		$24,000
		$120,000
		None of the answer choices is correct.

Exhibit 11-1 Ashville Company has two divisions - Bikes and Trikes. Ashville Company Segmented Income Statements For the Current Fiscal Year Ended December 31 Sales Cost of goods sold Gross margin Allocated overhead (from corporate) Selling and administrative expenses Operating income Income tax expense (40%) Net income Bikes Division $2.400,000 1,400,000 1,000,000 270.000 190.000 540.000 216,000 $ 324.000 Trikes Division $1,000,000 530.000 470.000 170.000 140,000 160.000 64.000 S 96.000