In the South Division of Occident Company,segment income for the most recent year exceeded residual income by $15,000.Also,return on investment exceeded the target rate of return by 10%.What was the level of investment in the South Division for the most recent year?
A)$ 15,000
B)$100,000
C)$150,000
D)An answer can't be determined from this information.

Question

Quizplus · Accepted Answer

Residual income is the difference between the actual income earned and the minimum level of income required by the company to achieve its target rate of return. Since the segment income exceeded the residual income by $15,000 and the return on investment exceeded the target rate of return by 10%, it means that the residual income for the South Division was $150,000 (10% of the investment). We can calculate the level of investment as follows:
Residual income = Segment income - (Target rate of return * Investment)
$15,000 = Segment income - (0.1 * Investment)
$150,000 = Investment
Therefore, the level of investment in the South Division for the most recent year was $150,000, which is option C.

In the South Division of Occident Company,segment Income for the Most