Answer the following questions using the information below:
The Bandage Medical Supply Company has two divisions that operate independently of one another. The financial data for the year 2014 reported the following results:
The company's desired rate of return is 10%. Income is defined as operating income.
-What are the respective residual incomes for the North and South Divisions?
A) $300,000 and $60,000
B) $300,000 and $100,000
C) $100,000 and a negative $300,000
D) $60,000 and $100,000

Question

Answer the following questions using the information below:
The Bandage Medical Supply Company has two divisions that operate independently of one another. The financial data for the year 2014 reported the following results:
  The company's desired rate of return is 10%. Income is defined as operating income.
-What are the respective residual incomes for the North and South Divisions?
A) $300,000 and $60,000 
B) $300,000 and $100,000 
C) $100,000 and a negative $300,000 
D) $60,000 and $100,000

Quizplus · Accepted Answer

Residual income is calculated by subtracting the product of the cost of capital percentage and the divisional operating assets from the divisional operating income. Without specific numbers provided in the question, the correct answer cannot be directly calculated. However, the choice (B) $300,000 and $100,000 is marked as correct based on the assumption that it aligns with the hypothetical data or example provided in the context of the question.

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