Ask Question
30 August, 06:49

Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. In January, the Commercial Products Division had average operating assets of $970,000 and net operating income of $143,700. What was the Commercial Products Division's residual income in January?

Multiple Choice

A. $7,900

B. ($20,118)

C. $20,118

D. ($7,900)

+2
Answers (1)
  1. 30 August, 08:48
    0
    Residual income = $7900

    so correct option is A. $7,900

    Explanation:

    given data

    rate of return = 14%

    average operating assets = $970,000

    net operating income = $143,700

    to find out

    What was the Commercial Products Division's residual income

    solution

    we get here Minimum net operating income that is

    Minimum net operating income = rate of return * average operating assets ... 1

    put here value

    Minimum net operating income = 14% * $970,000

    Minimum net operating income = $135,800

    and

    so Residual income will be here as

    Residual income = net operating income - Minimum net operating income

    Residual income = $143,700 - $135,800

    Residual income = $7900

    so correct option is A. $7,900
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers