The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%. What was the Consumer Products Division's residual income in May

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ayokenny2001 ayokenny2001 · Answer 1 · 2022-06-13T17:42:40+02:00

The Consumer Products Division's residual income in May is $1,300

Residual income is the amount of money an individual or business has remaining after paying all expenses.

Given that:

Net operating income

= $81,300

Average operating assets

= $800,000

Minimum required return

= Average operating assets * Rate of return

= $800,000 * 10%

= $80,000

Residual income

= Net operating income - Minimum required return

= $81,300 - $80,000

= $1,300

Hence, the Consumer Products Division's residual income in May is $1,300

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