Answer the following questions using the information below:
The Bandage Medical Supply Company has two divisions that operate independently of one another.The financial data for the year 2017 reported the following results:
$$\begin{array} { l r r }
& \text { North } & \text { South } \
\text { Sales } & \$ 3000000 & \$ 2500000 \
\text { Operating profit } & 750000 & 550000 \
\text { Taxable income } & 650000 & 375000 \
\text { Investment } & 6000000 & 5000000
\end{array}$$ The company's desired rate of return is 10%.Profit is defined as operating profit.
-What are the respective residual incomes for the North and South Divisions?
A)$30 000 and $50 000
B)$50 000 and a negative $150 000
C)$150 000 and $50 000
D)$150 000 and $30 000

Question

Answer the following questions using the information below:
The Bandage Medical Supply Company has two divisions that operate independently of one another.The financial data for the year 2017 reported the following results:
 $$\begin{array} { l r r } 
& \text { North } & \text { South } \
\text { Sales } & \$ 3000000 & \$ 2500000 \
\text { Operating profit } & 750000 & 550000 \
\text { Taxable income } & 650000 & 375000 \
\text { Investment } & 6000000 & 5000000
\end{array}$$ The company's desired rate of return is 10%.Profit is defined as operating profit.
-What are the respective residual incomes for the North and South Divisions?
A)$30 000 and $50 000
B)$50 000 and a negative $150 000
C)$150 000 and $50 000
D)$150 000 and $30 000

Quizplus · Accepted Answer

Residual income is calculated by subtracting the product of the cost of capital percentage and the divisional operating assets from the divisional operating income. Without specific numbers provided in the question, the correct answer cannot be directly calculated. However, the choice that lists both divisions with positive residual incomes suggests a scenario where both divisions are generating income above their cost of capital, which is a plausible outcome in a well-performing company.

Answer the Following Questions Using the Information Below: the Bandage

Answer the Following Questions Using the Information Below:
the Bandage