Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: Sales $ 37,880,000 Net operating income $ 3,508,960 Average operating assets $ 9,400,000 The company's minimum required rate of return 14 % The division's residual income is closest to:

Question

Business

Angie Green

8 September, 04:17

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: Sales $ 37,880,000 Net operating income $ 3,508,960 Average operating assets $ 9,400,000 The company's minimum required rate of return 14 % The division's residual income is closest to:

+4

Answers (1)

Know the Answer?

Barbie · Answer 1

The division's residual income is closest to $2,192,960

Explanation:

Residual income=net income - (average operating assets*required rate of return)

net operating income is $3,508,960

average operating assets is $ 9,400,000

required rate of return is 14%

residual income = $3,508,960 - ($9,400,000*14%)

residual income=$3,508,960-$1,316,000

residual income = $2,192,960

The residual income is the residue of net income after deducting an amount equivalent of cost of using the assets of the company funded by finance providers.