$\begin{array}{l}
\text { The following selected data pertain to Beck Co.'s Beam Division for last year: }\
\begin{array} { |l | r | }
\hline \text { Sales } & \$ 400,000 \
\hline \text { Variable Expenses } & \$ 100,000 \
\hline \text { Traceable Fixed Expenses } & \$ 250,000 \
\hline \text { Average Operating Assets } & \$ 200,000 \
\hline \text { Minimum Required Rate of Return } & 20 \% \
\hline
\end{array}
\end{array}$
-What was the residual income?
A) $10,000.
B) $40,000.
C) $50,000.
D) $80,000.

Question

$\begin{array}{l}
\text { The following selected data pertain to Beck Co.'s Beam Division for last year: }\
\begin{array} { |l | r | } 
\hline \text { Sales } & \$ 400,000 \
\hline \text { Variable Expenses } & \$ 100,000 \
\hline \text { Traceable Fixed Expenses } & \$ 250,000 \
\hline \text { Average Operating Assets } & \$ 200,000 \
\hline \text { Minimum Required Rate of Return } & 20 \% \
\hline
\end{array}
\end{array}$
-What was the residual income?
A) $10,000.
B) $40,000.
C) $50,000.
D) $80,000.

Quizplus · Accepted Answer

Residual income is calculated as the net operating income minus the product of the average operating assets and the minimum required rate of return. First, calculate the net operating income (NOI): Sales - Variable Expenses - Traceable Fixed Expenses = $400,000 - $100,000 - $250,000 = $50,000. Then, calculate the minimum required return: Average Operating Assets * Minimum Required Rate of Return = $200,000 * 20% = $40,000. Finally, calculate the residual income: NOI - Minimum Required Return = $50,000 - $40,000 = $10,000.

-What Was the Residual Income? A) $10,000

-What Was the Residual Income?
A) $10,000