Assume that Division Blue has achieved a yearly operating income of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return on investment of 11%, the residual income is
A)$99,000
B)$691,000
C)$209,000
D)$11,000

Question

Quizplus · Accepted Answer

The residual income is calculated by subtracting the product of the minimum acceptable return rate and the invested assets from the operating income. Here, it's $110,000 - (11% of $900,000) = $110,000 - $99,000 = $11,000.

Assume That Division Blue Has Achieved a Yearly Operating Income