East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 Cost of goods sold 280,000 Gross margin $251,250 Selling and administrative expense 190,000 Operating income $61,250 Less: Income taxes (@ 40%) 24,500 Net income $36,750 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return of 10%. Required: For East Mullett, calculate: 1. Average operating assets 2. Residual income
East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 Cost of goods sold 280,000 Gross margin $251,250 Selling and administrative expense 190,000 Operating income $61,250 Less: Income taxes (@ 40%) 24,500 Net income $36,750 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. East Mullett requires a minimum rate of return of 10%. Required: For East Mullett, calculate: 1. Average operating assets 2. Residual income
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 21BEB
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