6. Residual Income

Please complete the following two questions:

A. When determining residual income, who determines the minimum acceptable rate of return on divisional assets?

	top management
	Department management
	Employees in charge of purchasing the assets
	Division management

Financial data from the three divisions of the Garafalo Company are shown.

	Division A	Divison B	Division C
Income from operations	$200,600	$149,800	$130,700
Invested assets	$1,650,000	$1,016,000	$673,000

B. Assume that the top management of the Garafalo Company has established 11% as the minimum acceptable rate of return on divisional assets. Calculate the residual income for each division.

	Division A	Division B	Division C
Residual Income