Question

Worldwide Logistics provides the following​ information: Operating income $ 1 comma 550 comma 000 Net sales $ 14 comma 000 comma 000 Average total assets $ 2 comma 000 comma 000 ​Management's target rate of return 30​% What is the​ company's residual​ income?

Answer 1

The​ company's residual​ income is $950,000.

Step-by-step explanation:

Residual Income is calculated as Operating Income less Cost of Investment.

Calculation of Residual Income :

Operating income $1,550,000

Less Cost of Investment ($2,000,000 × 30%) ($600,000)

Residual Income $950,000

Conclusion :

The​ company's residual​ income is $950,000.