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Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Small Appliances Division Cleaning Products Division Sales $34,650,000
Calculating Residual Income
Forchen, Inc., provided the following information for two of its divisions for last year:
Small Appliances Division | Cleaning Products Division | |
Sales | $34,650,000 | $31,320,000 |
Operating income | 2,276,900 | 1,252,300 |
Operating assets, January 1 | 6,398,000 | 5,760,000 |
Operating assets, December 31 | 7,530,000 | 6,700,000 |
Forchen, Inc., requires an 6 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 7 percent? How would that affect the residual income of the two divisions?
Small Appliances Division residual income would be | - Select your answer -higher.lower.unaffected.Item 3 |
Cleaning Products Division residual income would be |
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