Lambda Division had the following information: $\begin{array}{lr}
\text { Asset base in Lambda Division } & \$ 400,000 \
\text { Met income in Lambda Division } & \$ 5,000 \
\text { Weighted average cost of capital } & 12 \% \
\text { Target ROI } & 15 \% \
\text { Margin for Lambda Division } & 20 \%
\end{array}$ What is the residual income for Lambda Division?
A)$(10,000)
B)$48,000
C)$7,500
D)$60,000

Question

Quizplus · Accepted Answer

Residual income is calculated as Net Income - (Asset Base * Target ROI). Here, it is $5,000 - ($400,000 * 15%) = $5,000 - $60,000 = -$55,000. Since the closest option is $(10,000), it seems there might be a mistake in the options or question data.

Lambda Division Had the Following Information What Is the Residual Income for Lambda Division? A)$(10,000) B)$48,000

Lambda Division Had the Following Information What Is the Residual Income for Lambda Division?
A)$(10,000)
B)$48,000