Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%.
-The residual income for Chicks Corporation is
A)$165,000
B)$302,500
C)$137,500
D)$191,500

Question

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%.​
-The residual income for Chicks Corporation is
A)$165,000
B)$302,500
C)$137,500
D)$191,500

Quizplus · Accepted Answer

Residual income is calculated as operating income minus the product of the desired minimum return rate and invested assets. Here, it's $302,500 - (15% of $1,100,000) = $302,500 - $165,000 = $137,500.

Chicks Corporation Had $1,100,000 in Invested Assets, Sales of $1,210,000