A publishing company is finalizing data for their most recently completed year. The production department spent $5,000 on a new printer and $3,000 on a new supercomputer. The Operating Income tied to the new printer is expected to be $556 while the supercomputer is expected to have an Operating Income of $337. The company's Required Rate of Return is 6%. Management would like to know how much Residual Income to expect from the new printer.
A) $219
B) $256
C) $300
D) $556

Question

Quizplus · Accepted Answer

This question requires the formula for Residual Income and knowledge about how to apply it. The formula is Operating Income - (Required Rate of Return × Investment). For the printer, do the following: $556 - (0.06 × $5,000) = $556 - $300 = $256 (Choice B).

A Publishing Company Is Finalizing Data for Their Most Recently