Using the following information, calculate the residual profit.
$$\begin{array} { l r }
\text { Sales } & \$ 750000 \
\text { Profit } & \$ 50000 \
\text { Average operating assets } & \$ 300000 \
\text { Shareholders' equity } & \$ 120000 \
\text { Minimum required rate of return } & 8 \%
\end{array}$$

Question

Using the following information, calculate the residual profit.
$$\begin{array} { l r } 
\text { Sales } & \$ 750000 \
\text { Profit } & \$ 50000 \
\text { Average operating assets } & \$ 300000 \
\text { Shareholders' equity } & \$ 120000 \
\text { Minimum required rate of return } & 8 \%
\end{array}$$

Quizplus · Accepted Answer

Residual profit is calculated as actual profit minus the minimum required return on average operating assets. Here, the minimum required return is 8% of $300,000, which is $24,000. Therefore, residual profit = $50,000 (actual profit) - $24,000 (minimum required return) = $26,000.

Using the Following Information, Calculate the Residual Profit A) $26 000 B) $40 400 C) $46 000 D)

Using the Following Information, Calculate the Residual Profit A) $26 000
B) $40 400
C) $46 000
D)