httpezto m p Exam 3 Ch 811 gested StrsEWeb Sice Gallery prev

http//ezto m p.\" Exam 3 Ch 8-11 gested Strs,EWeb Sice Gallery? previous Attempt View E connect ACCOUNTING Junper Design Ltd of Manchestor, England, s a company specialiaing in prowiding design services to residential davelopers. Last year the company had net opersing income of $00,000 on sales of $1,600,000. The company\'s average operating assats for the year were $1,800,000 and its minimum required rate of retun was 12% Required Compute the company\'s residual income for the year Avorage Net operaing income Minimam required retum Residual income oporating assets

Solution

Average Operating Assets 1800000

Net Operating Income 460000

Minimumreturn 12%

Residual Income  

In the above formula,
   A = Department\'s net operating income;
   B = Minimum required return on assets; and
   C = Average operating assets of the department

460000- (1800000*12%)=244000

Figures are bit blurr formula will apply

Residual Income (RI) = A ? (B × C)