Blue Oyster Cult Products is a division of a major corporation. Last year the di

Question

Blue Oyster Cult Products is a division of a major corporation. Last year the division had total sales of $28,540,000, net operating income of $2,597,140, and average operating assets of $5,708,000. The company's minimum required rate of return is 10%.

$2,597,140

$(1,141,600)

$2,026,340

$3,167,940

Blue Oyster Cult Products is a division of a major corporation. Last year the division had total sales of $28,540,000, net operating income of $2,597,140, and average operating assets of $5,708,000. The company's minimum required rate of return is 10%.

Explanation / Answer

Calculate residual income

Residual income = Actual operating income-Minimum operating income

= 2597140-(5708000*10%)

Residual income = 2026340

so answer is c) $2026340

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