Wiswell Inc. reported the following results from last year's operations: The average operating assets were $8,000,000.
At the beginning of this year, the company has a $900,000 investment opportunity that would involve sales of $2,070,000, a contribution margin ratio of 30% of sales, and fixed expenses of $538,200. The company's minimum required rate of return is 10%. If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:

Question

Wiswell Inc. reported the following results from last year's operations:  The average operating assets were $8,000,000.
At the beginning of this year, the company has a $900,000 investment opportunity that would involve sales of $2,070,000, a contribution margin ratio of 30% of sales, and fixed expenses of $538,200. The company's minimum required rate of return is 10%. If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:

Quizplus · Accepted Answer

11eacbfc_c50f_6959_8ffe_391ca92c6af8_TB7552_00 Net operating income = $912,000 + $82,800 = $994,800
Average operating assets = $8,000,000 + $900,000 = $8,900,000
 11eacbfc_c50f_906a_8ffe_1bb0ed177043_TB7552_00