Soderquist Corporation uses residual income to evaluate the performance of its divisions.The company's minimum required rate of return is 11%.In April,the Commercial Products Division had average operating assets of $100,000 and net operating income of $9,400.What was the Commercial Products Division's residual income in April?
A)-$1,600
B)$1,600
C)$1,034
D)-$1,034

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, it is $9,400 - ($100,000 * 11%) = $9,400 - $11,000 = -$1,600.

Soderquist Corporation Uses Residual Income to Evaluate the Performance of Its