Investment Center Cameras and camcorders Phones and communications Computers and

Question

Investment Center Cameras and camcorders Phones and communications Computers and accessories $4,500,000 $ 20,000,000 12,500,000 10,000,000 1,500,000 800,000 Assume a target income of 12% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.) Cameras and Phones andLComputers and Target Income Camcorders Communications Targeted return Cameras and Phones andComputers and Camcorders Communications Accessories Residual Income 0 Residual income (loss)

Explanation / Answer

Calculate residual income :

Cameras and camcorders Phones and communications Computers and accessories Average invested assets 20000000 12500000 10000000 Target return 12% 12% 12% Target income 2400000 1500000 1200000 Residual income Cameras and camcorders Phones and communications Computers and accessories Actual income 4500000 1500000 800000 Target income 2400000 1500000 1200000 Residual income 2100000 0 -400000

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