Division ABC has $750,000 in average assets and $200,000 in income. Division XYZ has $800,000 in average assets and $210,000 in

Question

2 years ago

10

income. The company's target rate is 10%. Which division has the highest residual income

1 answer:

solniwko [45] · Answer 1 · 2023-07-23T02:15:14+03:00

If Division XYZ has $800,000 in average assets and $210,000 in income. The division that has the highest residual income is: Division XYZ.

<h3>Residual income</h3>

Calculation for ABC Residual income

Residual income=$200,000-(0.10×$750,000)

Residual income=$200,000-$75,000

Residual income=$125,000

Calculation for XYZ Residual income

Residual income=$210,000 -(0.10×$80,000)

Residual income=$210,000-$80,000

Residual income=$130,000

Inconclusion the division that has the highest residual income is:Division XYZ.

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