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28 January, 01:28

Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $3,500,000; investment center income $610,000; a target income of 12% of average invested assets. The residual income for the division is:

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  1. 28 January, 01:50
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    The residual income of this division is $190,000

    Explanation:

    Formula of the computation is;

    Residual income = Operating income - (minimum rate of return x average total assets)

    Based on the above-mentioned example, the computation is;

    Residual income = $610,000 - (12% x $3,500,000)

    = $610,000 - $420,000

    =$190,000 (answer)

    •Residual income is the amount in excess of the minimum required rate of return or the desired income of the conpany.
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