The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating incomeInvested AssetsRetail Division$123,900 $590,000 Commercial Division182,400 760,000 Internet Division137,800 530,000 Assume that management has established a 12% minimum acceptable return for invested assets. a.  Determine the residual income for each division. Retail DivisionCommercial DivisionInternet DivisionOperating income$123,900   $182,400    $137,800   Minimum acceptable operating income as a percent of invested assets      Residual income$ $ $ b.  Which division has the most residual income?

Question
Asked Nov 25, 2019

The operating income and the amount of invested assets in each division of Conley Industries are as follows:

  Operating income Invested Assets
Retail Division $123,900   $590,000  
Commercial Division 182,400   760,000  
Internet Division 137,800   530,000  

Assume that management has established a 12% minimum acceptable return for invested assets.

 

a.  Determine the residual income for each division.

  Retail Division Commercial Division Internet Division
Operating income $123,900    $182,400     $137,800   
Minimum acceptable operating income as a percent of invested assets            
Residual income $   $   $  

b.  Which division has the most residual income?
 

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Expert Answer

Step 1
Retail
Division Division
$123,900
Commercial Internet
Division
$182,400 $137,800
(a)
Operating income (x)
Minimum acceptable return
y) Assets invested x12%
Residual income = (x) - (y)
S91,200 $63,600
74.200
$70.800
53.100
91,200
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Retail Division Division $123,900 Commercial Internet Division $182,400 $137,800 (a) Operating income (x) Minimum acceptable return y) Assets invested x12% Residual income = (x) - (y) S91,200 $63,600 74.200 $70.800 53.100 91,200

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