Reference: 12-06
the Baily Division Recorded Operating Data as Follows

Reference: 12-06
The Baily Division recorded operating data as follows for the past two years: $$\begin{array} { | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } \\\hline \text { Sales } & ? & \$ 1,200,000 \\\hline \text { Stockholders' equity } & \$ 540,000 & 720,000 \\\hline \text { Average operating assets } & \$ 600,000 & ? \\\hline \text { Margin } & 15 \% & ? \\\hline \text { Return on investment } & 22.5 \% & 18 \% \\\hline\end{array}$$ Baily Division's turnover was exactly the same in both Year 1 and Year 2.
-Suppose a manager's performance is to be measured by residual income. Which of the following will not result in an increase in the residual income figure for this manager, assuming other factors remain constant?

A) An increase in sales.
B) A decrease in operating assets.
C) A decrease in expenses.
D) An increase in the minimum required rate of return.

Correct Answer:

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