Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 19

Foreman Publishing Company’s income for the most recent quarter was $500,000, and the average net book value of assets during the quarter was $1.5 million. If the company has a required rate of return of 15 percent on investment, what was residual income for the quarter?

Step 1 of 2

Residual Income:

Residual income is that income which the organization receives after the execution of production work and this continues in future as well. The residual income indicates the organization revenue of net operating or margin that is higher than the rate of return.