Assume that divisional operating income 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 is calculated as the operating income minus the product of the minimum required return rate and the divisional assets. Here, it's $215,000 - (15% of $1,000,000) = $215,000 - $150,000 = $65,000.

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