Question

Carter Company reported the following financial numbers for one of its divisions for the year, average total assets of $4,705.000; sales of $4,705,000; cost of goods sold of $2,730,000; and operating expenses of $1,552,000. Assume a target income of 8% of average invested assets. Compute residual income for the division.

Answer 1

$46,600

Step-by-step explanation:

The average total assets is $4,705,000

Sales is $4,705,000

Cost of goods is 2730,000

operating expenses is $1,552,000

Therefore the residual income can be calculated as follows

= 4,705,000-2,730,000-1,552,000

= 423,000

423,000-(4705000×8/100)

= 423,000-(376400)

= 46,600

Hence the residual income for the division is $46,600