Suppose the manager of the Axle Division desires an annual residual income of $45,000. In order to achieve this, Axle should sell how many units per year?

A) 19,500.
B) 18,250.
C) 16,750.
D) 14,500.

To achieve a residual income of $45,000, first calculate the target operating income. The minimum required return on $750,000 of operating assets is $750,000 * 12% = $90,000. Adding the desired residual income of $45,000 to this gives a total required operating income of $135,000. The contribution margin per unit is $50 - $30 = $20. The break-even point in units is calculated by dividing the total fixed costs plus the required operating income by the contribution margin per unit: ($200,000 + $135,000) / $20 = 16,750 units.