The following data relates to Haven Corporation and its Northern Division.

What is the Northern Division's Residual Income (RI)?
A)$600,000
B)$950,000
C)$400,000
D)$350,000

Name: The following data relates to Haven Corporation and its Northern Division. What is the Northern Division's Residual Income (RI)? A)$600,000 B)$950,000 C)$400,000 D)$350,000
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Question

The following data relates to Haven Corporation and its Northern Division.

What is the Northern Division's Residual Income (RI)?
A)$600,000 
B)$950,000 
C)$400,000 
D)$350,000

Quizplus · Accepted Answer

D)
Residual income = Operating income - (Target rate of return × Total assets)
= 950,000 - (15% × 4,000,000)
= 950,000 - 600,000 = 350,000

The Following Data Relates to Haven Corporation and Its Northern