Question

The following information is provided for each division. Investment Center Net Income Average Assets Cameras and camcorders $ 4,500,000 $ 20,000,000 Phones and communications 1,500,000 12,500,000 Computers and accessories 800,000 10,000,000 Assume a target income of 12% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.)

Answer 1

Answer:

Cameras & Camcorders = $2,100,000

Phones & Communication  = 0

Computers &Accessories  = -$400,000

Explanation:

Computation of the given data are as follow:-

Target Income = Average Assets × Target Income Rate of Average Invested Assets

Cameras & Camcorders = $20,000,000 × 12÷100 = $2,400,000

Phones &Communication = $12,500,000 × 12÷100 =  $1,500,000

Computers &Accessories = $10,000,000 × 12÷100 = $1,200,000

Residual Income = Net Income - Target Income

Cameras & Camcorders = $4,500,000 - $2,400,000 = $2,100,000

Phones & Communication = $1,500,000 - $1,500,000 = 0

Computers &Accessories = $800,000 - $1,200,000 = -$400,000