1. Question Content Area

   Calculating Residual Income

   Forchen, Inc., provided the following information for two of its divisions for last year:

   	Small Appliances Division	Cleaning Products Division
   Sales	$34,600,000	$31,330,000
   Operating income	2,350,700	1,254,800
   Operating assets, January 1	6,399,000	5,630,000
   Operating assets, December 31	7,570,000	6,800,000

   Forchen, Inc., requires an 8 percent minimum rate of return.

   Required:

   1. Calculate residual income for the Small Appliances Division.

   $ fill in the blank 1

   2. Calculate residual income for the Cleaning Products Division.

   $ fill in the blank 2

   3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions?

   Small Appliances Division residual income would be	higher.lower.unaffected.
   Cleaning Products Division residual income would be	higher.lower.unaffected.