Question

Cabell Products is a division of a major corporation. Last year the division had total sales of $11,440,000, net operating income of $686,400, and average operating assets of $2,402,400. The company's minimum required rate of return is 13%. The division's residual income is closest to:Cabell Products is a division of a major corporation. Last year the division had total sales of $11,440,000, net operating income of $686,400, and average operating assets of $2,402,400. The company's minimum required rate of return is 13%. The division's residual income is closest to:

Answer 1

Answer:

Residual income=$374,088

Explanation:

Calculation for Cabell Products division's residual income

Formula for Residual income is:

Residual income = Net operating income - ( Average operating assets * Minimum required rate of return )

Residual income= $686,400-($2,402,400*13%)

Residual Income=$686,400-$312,312

Residual income=$374,088

Therefore the division's residual income is closest to:$374,088