Assume that divisional income from operations amounts to $215,000, and top management has established 15% as the minimum return on divisional assets totaling $1,000,000. The residual income for the division is
A) $65,000
B) $215,000
C) $635,000
D) $150,000

Question

Quizplus · Accepted Answer

Residual Income = Divisional Income - Minimum Required Return on Divisional Assets
Residual Income = $215,000 - (15% x $1,000,000)
Residual Income = $215,000 - $150,000
Residual Income = $65,000

Therefore, the residual income for the division is $65,000 which is option A.

Assume That Divisional Income from Operations Amounts to $215,000, and Top