The following data are for the Akron Division of Consolidated Rubber, Inc.:

-For the past year,the minimum required rate of return was:
A) 30%
B) 12%
C) 15%
D) 6%

Question

The following data are for the Akron Division of Consolidated Rubber, Inc.:
 
-For the past year,the minimum required rate of return was:
A) 30% 
B) 12% 
C) 15% 
D) 6%

Quizplus · Accepted Answer

Residual income = Net operating income - (Average operating assets × Minimum required rate of return)
$15,000 = $45,000 - ($250,000 × Minimum required rate of return)
$250,000 × Minimum required rate of return = $45,000 - $15,000
$250,000 × Minimum required rate of return = $30,000
Minimum required rate of return = $30,000 ÷ $250,000 = 12%

The Following Data Are for the Akron Division of Consolidated