The Consumer Products Division of Goich Corporation had average operating assets of $1,000,000 and net operating income of $91,700 in May. The minimum required rate of return for performance evaluation purposes is 9%.What was the Consumer Products Division's residual income in May?
A) $(1,700)
B) $8,253
C) $1,700
D) $(8,253)

Question

Quizplus · Accepted Answer

Residual income is calculated as the net operating income minus the product of the average operating assets and the minimum required rate of return. Here, it's $91,700 - ($1,000,000 * 9%) = $91,700 - $90,000 = $1,700.

The Consumer Products Division of Goich Corporation Had Average Operating