Question
Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year:
Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year:
| Retail Division | Wholesale Division | |
|---|---|---|
| Operating income | $ 2,750,000 | $ 6,250,000 |
| Operating assets | $ 18,500,000 | $ 38,500,000 |
Terra Company has set a target return on investment (ROI) of 14% for both divisions.
Which of the following statements is accurate?
Residual income for the wholesale division was $160,000.
Residual income for the wholesale division was $860,000.
Residual income for the retail division was $860,000.
None of these answers are correct.
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Cost Accounting A Managerial Emphasis
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
13th Edition
8120335643, 136126634, 978-0136126638
