Question

Quincy corp. earned controllable margin of $500,000 on sales of $6,400,000. the division had average operating assets of $5,200,000. the company requires a return on investment of at least 8%. how much is residual income

Answer 1

RI = Operating income - (Minimum required rate of return x Operating assets)
RI = 500,000 - (0.08 x 5,200,000)
RI = 84,000
Residual income is $84,000