If operating income is $60,000, average operating assets are $240,000, and the minimum required rate of return is 20%, what is the residual income?
A)40%
B)25%
C)$12,000
D)$48,000

Question

Quizplus · Accepted Answer

Residual income is calculated as operating income minus (minimum required rate of return x average operating assets).

Residual income = $60,000 - (20% x $240,000) = $60,000 - $48,000 = $12,000.

Therefore, the residual income is $12,000.

If Operating Income Is $60,000, Average Operating Assets Are $240,000