The income from operations and the amount of invested assets in each division of
ID: 2455573 • Letter: T
Question
The income from operations and the amount of invested assets in each division of Devon Industries are as follows: Income from Operations Invested Assets Sporting Goods Division $152,000 800,000 Health Care Division 81,600 510,000 Commercial Division 66,700 290,000 Assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. Sporting Goods Division Health Care Division Commercial Division Income from operations $152,000 $81,600 $66,700 Minimum amount of income from operations Residual income $ $ $ b. Which division has the most residual income?
Explanation / Answer
Residual income = Operating income - ( Invested assets - Minimum rate of return)
Sporting division has the most residual income
Sporting goods 152,000 - $80,000 $72,000 Health care division $81,600 - $51,000 $30,600 Commercial division $66,700 - $29,000 $37,700Related Questions
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