Question

The Consumer Products Division of Mickolick Corporation had average operating assets of $510,000 and net operating income of $42,000 in August. The minimum required rate of return for performance evaluation purposes is 8%. What was the Consumer Products Division's minimum required return in August? $3,360 $42,000 $44,160 $40,800

Answer 1

Answer:

The Consumer Products Division's minimum required return in August was $40,800

Explanation:

For computing the minimum required return, the following equation is used.

Minimum required rate of return = Net operating income ÷ Average operating assets

8% = Net operating income ÷ $510,000

8% × $510,000 = Net operating income

Net operating income = $40,800

or Minimum required rate of return = $40,800

For computation part, the net operating income is irrelevant so it is not considered.

Thus, the Consumer Products Division's minimum required return in August was $40,800