Given the following data: The residual income would be:
A)$2, 800
B)$0
C)$6, 000
D)$8, 000

Name: Given the following data: The residual income would be: A)$2, 800 B)$0 C)$6, 000 D)$8, 000
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Question

Given the following data:  The residual income would be:
A)$2, 800 
B)$0 
C)$6, 000 
D)$8, 000

Quizplus · Accepted Answer

Margin = Net operating income ÷ Sales
0.10 = Net operating income ÷ $100, 000
Net operating income = 0.10 × $100, 000 = $10, 000
Residual income = Net operating income - (Average operating assets × Minimum required rate of return)
= $10, 000 - ($40, 000 × 0.18)= $10, 000 - $7, 200 = $2, 800

Given the Following Data: the Residual Income Would Be