2.

Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Sales Small Appliances Cleaning Products Division Division $34,630,000 $31,350,000 2,526,200 1,255,000 6,398,000 5,690,000 7,550,000 6,160,000 Operating income Operating assets, January 1 Operating assets, December 31 Forchen, Inc., requires an 9 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. 2. Calculate residual income for the Cleaning Products Division. $ 3. What if the minimum required rate of return was 10 percent? How would that affect the residual income of the two divisions? Small Appliances Division residual income would be Cleaning Products Division residual income would be