QS 9-11 Computing residual income LO A1 Investment Center Net Income Average Ass

Question

QS 9-11 Computing residual income LO A1 Investment Center Net Income Average Assets Cameras and camcorders Phones and communications Computers and accessories $6, 450,000 1,806,000 1,200,000 s28,700,000 12,900,000 11,400,000 Assume a target income of 14% of average invested assets Required: Compute residual income for each division. (Enter losses with a minus sign.) Computers and Cameras and CamcordersCommunicationsAccessories Phones and Target Income Targeted return Target income Residual Income Computers and Cameras and CamcordersCommunicationsAccessories Phones and Residual income (loss)

Explanation / Answer

Note :

1. Target Income = Average Assets *14%

Target Income Cameras and Camcorders Phones and Communications Computers and Accessories Average Assets 2,87,00,000 1,29,00,000 1,14,00,000 Targeted Return 14% 14% 14% Target Income 4,018,000 1,806,000 1,596,000 Residual Income Cameras and Camcorders Phones and Communications Computers and Accessories Net Income 64,50,000 18,06,000 12,00,000 Less : Target Income 40,18,000 18,06,000 15,96,000 Residual Income ( loss) 2,432,000 -    -396,000

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