Selected data from Division A of Green Company are as follows:
$\begin{array}{lcc}
\text { Sales } & \$ & 500,000 \
\text { Average investment } & \$ & 300,000 \
\text { Operating income } & \$ & 60,000 \
\text { Minimum rate of return } & & 15 \%
\end{array}$Division A's residual income (RI) is:
A)$15,000.
B)$24,000.
C)$30,000.
D)$36,000.
E)$54,000.

Question

Quizplus · Accepted Answer

Residual income is calculated as Operating Income minus the product of Average Investment and Minimum Rate of Return. RI = $60,000 - ($300,000 * 15%) = $60,000 - $45,000 = $15,000.

Selected Data from Division a of Green Company Are as Follows