Reference: 12-10
Harstin Corporation has provided the following data: $$\begin{array} { | l | r | }
\hline \text { Sales } & \$ 625,000 \
\hline \text { Gross margin } & 70,000 \
\hline \text { Net operating income } & 50,000 \
\hline \text { Stockholders' equity } & 90,000 \
\hline \text { Average operating assets } & 250,000 \
\hline \text { Residual income } & 20,000 \
\hline
\end{array}$$
-The minimum required rate of return for the past year was?
A)36%.
B)12%.
C)8%.
D)40%.

Question

Reference: 12-10
Harstin Corporation has provided the following data: $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 625,000 \
\hline \text { Gross margin } & 70,000 \
\hline \text { Net operating income } & 50,000 \
\hline \text { Stockholders' equity } & 90,000 \
\hline \text { Average operating assets } & 250,000 \
\hline \text { Residual income } & 20,000 \
\hline
\end{array}$$
-The minimum required rate of return for the past year was?
A)36%.
B)12%.
C)8%.
D)40%.

Quizplus · Accepted Answer

Residual income is calculated as the net operating income minus the product of the average operating assets and the minimum required rate of return. Given the residual income of $20,000 and net operating income of $50,000, we can set up the equation: $50,000 - ($250,000 * minimum rate of return) = $20,000. Solving for the minimum rate of return gives us 12%.

Reference: 12-10 Harstin Corporation Has Provided the Following Data -The Minimum Required Rate of Return for the Past Year

Reference: 12-10
Harstin Corporation Has Provided the Following Data -The Minimum Required Rate of Return for the Past Year