Help l variable costs of 210000 and direct fixed costs total

Help l variable costs of $210000, and direct fixed costs totaling $100000. The company\'s operating assets total $1000000, and its required 10 return is 10%. How much is the residual income? o $500000 O $21000 $110000 $100000 Click if you would like to Show Work for this question: Oeen Show Work Open Show

Solution

Correct answer $ 190000

Calculation and Explanation

Residual income is income left after deducting required return on Assets.

SHEFFIELD CORP.

Income Statement

Sales revenue

$      600,000.00

Less: Variable cost

$      210,000.00

Contribution

$      390,000.00

Less: Fixed Cost

$      100,000.00

Net Income

$      290,000.00

Total Assets

$ 1,000,000.00

Required return on assets

10%

Required return on assets

$      100,000.00

Actual return

$      290,000.00

Residual income

(Actual Return-Required Return)

Residual income

$      190,000.00

All the options given are Incorrect.

SHEFFIELD CORP.
Income Statement
Sales revenue	$      600,000.00
Less: Variable cost	$      210,000.00
Contribution	$      390,000.00
Less: Fixed Cost	$      100,000.00
Net Income	$      290,000.00