Selected financial data for the Photocopies Division of Elizabeth's Business Machines is as follows:

What is the Photocopier Division's residual income?
A)$1,686,400
B)$353,600
C)$1,156,000
D)$1,690,000

Question

Selected financial data for the Photocopies Division of Elizabeth's Business Machines is as follows:

What is the Photocopier Division's residual income?
A)$1,686,400 
B)$353,600 
C)$1,156,000 
D)$1,690,000

Quizplus · Accepted Answer

A)
Residual income = Operating income - (target rate of return × Total assets)
= 2,040,000 - (13% × 2,720,000)
= 2,040,000 - 353,600 = 1,686,400

Selected Financial Data for the Photocopies Division of Elizabeth's Business