Which of the following is the correct formula to compute residual income?
A) Average operating assets - Net operating income
B) Average operating assets -(Net operating income *Minimum required rate of return)
C) Net operating income * Minimum required rate of return
D) Net operating income - (Average operating assets * Minimum required rate of return)

Question

Quizplus · Accepted Answer

Residual income is calculated by subtracting the product of the minimum required rate of return and the average operating assets from the net operating income. This is accurately represented in option D.

Which of the Following Is the Correct Formula to Compute