Question

The West Division of Cecchetti Corporation had average operating assets of $240,000 and net operating income of $42,200 in August. The minimum required rate of return for performance evaluation purposes is 19%. What was the West Division's residual income in August

Answer 1

Answer:

Correct answer is $45,600

Explanation:

Average operating assets x Minimum required rate of return= $45,600 $240,000 * 19% = $45,600

Answer 2

Answer: See explanation

Explanation:

West Division's residual income in August would be calculated as the difference between the Net Operating Income and the Minimum Required Return.

= $42,200 – ($240,000 x 19%)

= $42,200 - $45,600

= $(3,400) Negative