Assume that divisional income from operations amounts to $192,000 and top management has established 15% as the minimum rate of return on divisional assets totaling $1,000,000. The residual income for the division is:
A) $42,000
B) $28,800
C) $92,000
D) $0

Question

Quizplus · Accepted Answer

Residual income is calculated as divisional income from operations minus the product of the minimum rate of return and divisional assets. Here, $192,000 - (15% of $1,000,000) = $192,000 - $150,000 = $42,000.

Assume That Divisional Income from Operations Amounts to $192,000 and Top