The following information is available for Aggie Auto Sales: $\begin{array}{lr}
\text { Average operating assets } & \$ 750,000 \
\text { Controllable margin } & 90,000 \
\text { Contribution margin } & 175,000 \
\text { Minimum rate of return } & 10 \%
\end{array}$ How much is Aggie Auto's residual income?

Question

Quizplus · Accepted Answer

Residual income is calculated as the controllable margin minus the product of average operating assets and the minimum rate of return. Here, it is $90,000 - ($750,000 * 10%) = $90,000 - $75,000 = $15,000.

The Following Information Is Available for Aggie Auto Sales How Much Is Aggie Auto's Residual Income? A)$125,000 B)$640,000 C)$15,000

The Following Information Is Available for Aggie Auto Sales How Much Is Aggie Auto's Residual Income?
A)$125,000
B)$640,000
C)$15,000