The Consumer Products Division of Mickolick Corporation had average operating assets of $450,000 and net operating income of $38,700 in August. The minimum required rate of return for performance evaluation purposes is 10%. What was the Consumer Products Division's residual income in August?
A)$3,870
B)$6,300
C)($3,870)
D)($6,300)

Question

Quizplus · Accepted Answer

Residual income is calculated as net operating income minus the product of average operating assets and the minimum required rate of return. Here, $38,700 - ($450,000 * 10%) = $38,700 - $45,000 = ($6,300).

The Consumer Products Division of Mickolick Corporation Had Average Operating