The Tooling Division of Lakes Costmetics reported a profit of $4.6 million. Divisional capital was $10.5 million and the imputed interest rate is 13%. Residual income must be:

Name: The Tooling Division of Lakes Costmetics reported a profit of $4.6 million. Divisional capital was $10.5 million and the imputed interest rate is 13%. Residual income must be:
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Question

Quizplus · Accepted Answer

Residual income = Profit - (Capital * Imputed interest rate)= $4.6 million - ($10.5 million * 13%)= $4.6 million - $1.365 million= $3,235,000

The Tooling Division of Lakes Costmetics Reported a Profit of $4.6