A divisional manager receives a bonus based on 20% of the residual income from the division. The results of the division include: Divisional revenues, $1,000,000; divisional expenses, $500,000; divisional assets, $2,000,000; and the required rate of return is 15%. What amount represents the manager's bonus?

Choice "d" is correct as shown in the computation below: https://kxbjsyuhceggsyvxdkof.supabase.co/storage/v1/object/public/file-images/AICPA_CPA-Business/page_167_img_1.jpg Choice "a" is incorrect. The amount of the residual income itself is not the amount of the bonus. Choice "b" is incorrect. The difference between revenues (before consideration of divisional expenses) and the hurdle amount is not residual income. The bonus would be improperly calculated if residual income were to be inflated by divisional expenses as suggested by this answer. Choice "c" is incorrect. The difference between the hurdle amount and the residual income ($100,000) is not the bonus amount.