Residual Income

The income from operations and the amount of invested assets in each division of Beck Industries are as follows:

Income from Operations Invested Assets

Retail Division $149,100 $710,000

Commercial Division 91,800 510,000

Internet Division 80,000 500,000

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

Income from operations $149,100 $91,800 $80,000

Minimum acceptable income from operations as a percent of invested assets _________ _________ __________

Residual income $________ $________ $__________

b.Which division has the most residual income?

A. Commercial Division

B. Internet Division

C. Retail Division