Question

Carter Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000. Assume a target income of 10% of average invested assets. Compute residual income for the division:

Answer 1

Answer:

$193,000

Explanation:

                              Carter Company

Sales                                                         4,525,000

Cost of goods sold                                  -2,550,000

                                                                1,975,000

Operating expenses                                -1,372,000

Net Income                                               603,000

Average invested assets     4,100,000

Target income 10%                410,000       410,000

Residual income                                       $193,000