Candy's Chocolate Company's financial management is compiling data in order to assess the favorability of the company's investments. The Boise division of the company calculates a total investment of $2,000,000 and the operating income is computed to be $380,000 while the required rate of return is 15%. The Butte division of the company has tallied a total investment of $1,500,000 and an operating income of $230,000 while the Butte division also has a 15% required rate of return.

Required

Compute the residual income at the Boise division and the cost of capital for the Butte division.

A.

$300,000 and $225,000

B.

$80,000 and $225,000

C.

$80,000 and $5,000

D.

$225,000 and $5,000

E.

$120,000 and $23