Hy Work (2 remai eBook Residual Income The income from operations and the amount

Question

Hy Work (2 remai eBook Residual Income The income from operations and the amount of Invested assets in each division of bevon Industries are as follows: Income from Operations Invested Assets Sporting Goods Division Health Care Division Commercial Division Assume that management has established a 12% minimum acceptable rate of a. Determine the residual income for each division. $163,800 104,500 139,400 780,000 550,000 820,000 return for invested asset Commercial Division $139,400 Sporting Goods Division Health Care Division 104,500 Income from operations Minimum amount of income from operations Residual income b. Which division has the most residual income? $163,800 Check My Werk (2 remaining)

Explanation / Answer

Hence Sporting Goods Division has the most residual income.

Sporting Goods Health Care Commercial Divison Income from operations 163800 104500 139400 Minimum amount of income from operations(Invested assets*Minimum required rate) (780000*0.12)=93600 (550000*0.12)=66000 (820000*0.12)=98400 Residual income(Income from operations-Minimum income from operations) 70200 38500 41000

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