Computing Residual Income or Loss
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Scenario: Deskin Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 19%. In February, the Commercial Products Division had average operating assets of $780,000 and net operating income of $139,800. What was the Commercial Products Division's residual income in February?
a. -$8,400
b. -$26,562
c. $8,400
d. $26,562
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Solution Summary
This solution illustrates how to compute residual income or loss in about 60 words. All calculations are provided.
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9The residual income of a division is the excess of that division's return over the "cost" of obtaining that return (i.e., the required return on the ...
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