The following data are available for the South Division of Redride Products, Inc
ID: 2451103 • Letter: T
Question
The following data are available for the South Division of Redride Products, Inc. and the single product it makes:
If South wants a residual income of $52,000 and the minimum required rate of return is 11.00%, the annual turnover will have to be (Round your intermediate calculations and final answer to 2 decimal places):
0.58
0.29
0.29
1.72
Chace Products is a division of a major corporation. Last year the division had total sales of $22,800,000, net operating income of $582,600, and average operating assets of $5,750,000. The company's minimum required rate of return is 12.00%.
The division's residual income is closest to:
$582,600
$1,272,600
$(2,153,400)
$(107,400)
The West Division of Shekarchi Corporation had average operating assets of $657,000 and net operating income of $84,500 in March. The minimum required rate of return for performance evaluation purposes is 14%.
What was the West Division's residual income in March?
-$7,480
$11,830
-$11,830
$7,480
Unit selling price $28 Variable cost per unit $14.00 Annual fixed costs $291,200 Average operating assets $1,900,000Explanation / Answer
Answer:RI = Operating Income - (Operating Assets x Target Rate of Return)
$52000=Operating income-(1900000*11%)
operating income=261000
Dollar sales to earn a target profit=261000+291200/0.50
=$1104400
Turnover=Sales/Avergage operating assets
=$1104400/$1,900,000
=0.58
Answer:RI = Operating Income - (Operating Assets x Target Rate of Return)
=$582,600-($5,750,000*12%)
=-$107400
Answer: RI = Operating Income - (Operating Assets x Target Rate of Return)
=$84,500-($657,000*14%)
=-7480
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