Compute the residual income for the Hi Ho investment center as shown below. $\begin{array}{ll}
& \text { Hi Ho Subsidiary } \
\text { Total sales } & \$ 20,000 \
\text { Operating income } & \$ 4,300 \
\text { Beginning assets invested } & \$ 14,000 \
\text { Encling assets invested } & \$ 16,000 \
\text { Average assets invested } & \$ ? \
\text { DesiredROI } & 25 \% \
\text { Resichual income } & \$ ?
\end{array}$

Question

Quizplus · Accepted Answer

Residual income is calculated as Operating Income - (Average Assets Invested * Desired ROI). Average Assets Invested = ($14,000 + $16,000) / 2 = $15,000. Desired ROI = 25% of $15,000 = $3,750. Residual Income = $4,300 - $3,750 = $550.

Compute the Residual Income for the Hi Ho Investment Center