Soderquist Corporation uses residual income to evaluate the performance of its d

Question

Soderquist Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 10%. In April, the Commercial Products Division had average operating assets of $140,000 and net operating income of $13,300. What was the Commercial Products Division's residual income in April?

Soderquist Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 10%. In April, the Commercial Products Division had average operating assets of $140,000 and net operating income of $13,300. What was the Commercial Products Division's residual income in April?

Explanation / Answer

residual income=net operating income of $13,300-(average operating assets of $140,000 *minimum required rate of return is 10%)

=-$700.

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