The following information pertains to the three divisions of Marlow Company: What is the residual income for Division X?
A) $36,000
B) $45,000
C) $(9,000)
D) $(36,000)

Question

The following information pertains to the three divisions of Marlow Company:  What is the residual income for Division X?
A) $36,000 
B) $45,000 
C) $(9,000) 
D) $(36,000)

Quizplus · Accepted Answer

Residual income is calculated as operating income minus a minimum required return on invested capital. Division X's operating income is $90,000 and its required return on invested capital is $99,000. Therefore, its residual income is $(9,000).

The Following Information Pertains to the Three Divisions of Marlow