Edinger Industries is a division of a major corporation. The following data are for the latest year of operations: Sales$20,760,000 Net operating income$2,553,480 Average operating assets$6,000,000 The company's minimum required rate of return 16%Required:What is the division's residual income?
What will be an ideal response?
Residual income = Net operating income (Average operating assets × Minimum required rate of return).
= $2,553,480 - ($6,000,000 × 16%) = $2,553,480 - $960,000 = $1,593,480.
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