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3 years ago

Forchen, Inc., provided the following information for two of its divisions for last year:

Business

1 answer:

Ede4ka [16]3 years ago

3 0

Answer:

Forchen, Inc.

a. Residual income for the Small Appliances Division:

$2,218,880

b. Residual income for the Cleaning Products Division:

$788,800

Explanation:

a) Data and Calculations:

Small Appliances Cleaning Products

Division Division

Sales $34,670,000 $31,320,000

Operating income 2,773,600 1,252,800

Operating assets, January 1 6,394,000 5,600,000

Operating assets, December 31 7,474,000 6,000,000

Average operating assets 6,934,000 5,800,000

Rate of return (8%) 554,720 464,000

Residual income 2,218,880 788,800

b) The rate of return of 8% is computed on the average operating assets. The residual income is the difference between the operating income and the minimum rate of return.

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Answer:

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