38) Cabell Products is a division of a major corporation. Last year the division

Question

38) Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%.

The division's residual income is closest to:

A) $2,524,320

B) $1,324,320

C) $1,924,320

D) $(607,680)

33) The Millard Division's operating data for the past two years are provided below:

Millard Division's margin in Year 2 was 150% of the margin in Year 1.

The turnover for Year 1 was:

A) 3.0
B) 4.0
C) 1.5

D) 1.2

Year 1 year 2 return on investment 12% 36% net operating income ? $360,000 turnover ? 3 margin ? ? sales $3,200,000 ?

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

38)

Residual Income

= Net Operating Income – Average operating assets x Required rate of return

= $1,924,320 - $6,000,000 x 10%

= $1,924,320 - $600,000

= $1,324,320

So, as per above calculations, option B is the correct option

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