Assume that divisional income from operations amounts to $187,000 and top management has established 12% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is:
A) $67,000.
B) $22,440.
C) $120,000.
D) $0.

Question

Quizplus · Accepted Answer

Residual income is calculated as the income from operations minus the product of the minimum rate of return and divisional assets. Here, it is $187,000 - (12% of $1,000,000) = $187,000 - $120,000 = $67,000.

Assume That Divisional Income from Operations Amounts to $187,000 and Top