http//ezto m p.\" Exam 3 Ch 8-11 gested Strs,EWeb Sice Gallery? previous Attempt

Question

http//ezto m p." Exam 3 Ch 8-11 gested Strs,EWeb Sice Gallery? previous Attempt View E connect ACCOUNTING Junper Design Ltd of Manchestor, England, s a company specialiaing in prowiding design services to residential davelopers. Last year the company had net opersing income of $00,000 on sales of $1,600,000. The company's average operating assats for the year were $1,800,000 and its minimum required rate of retun was 12% Required Compute the company's residual income for the year Avorage Net operaing income Minimam required retum Residual income oporating assets

Explanation / Answer

Average Operating Assets 1800000

Net Operating Income 460000

Minimumreturn 12%

Residual Income  

In the above formula,
   A = Department's net operating income;
   B = Minimum required return on assets; and
   C = Average operating assets of the department

460000- (1800000*12%)=244000

Figures are bit blurr formula will apply

Residual Income (RI) = A ? (B × C)

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