A publishing company is finalizing data for their most recently completed year. The production department spent $5,000 on a new printer and $3,000 on a new supercomputer. The Operating Income tied to the new printer is expected to be $556 while the supercomputer is expected to have an Operating Income of $337. The company's Required Rate of Return is 6%. Management would like to know how much Residual Income to expect from the supercomputer.
A) $157
B) $180
C) $219
D) $337

Question

Quizplus · Accepted Answer

This question requires the formula for Residual Income and knowledge about how to apply it. The formula is Operating Income - (Required Rate of Return × Investment). For the supercomputer, do the following: $337 - (0.06 × $3,000) = $337 - $180 = $157 (Choice A).

A Publishing Company Is Finalizing Data for Their Most Recently