Question
The operating income and the amount of invested assets in each division of Stewart Industries are as follows: Operating Income Invested Assets Retail Division $11,700,000
The operating income and the amount of invested assets in each division of Stewart Industries are as follows:
| Operating Income | Invested Assets | |
|---|---|---|
| Retail Division | $11,700,000 | $45,000,000 |
| Commercial Division | 12,600,000 | 63,000,000 |
| Data Analytics Division | 1,920,000 | 12,000,000 |
Assume that management has established a 12% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
| Line Item Description | Retail Division | Commercial Division | Data Analytics Division |
|---|---|---|---|
| Operating income | $11,700,000 | $12,600,000 | $1,920,000 |
| Minimum amount of operating income | |||
| Residual income |
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Cornerstones of Cost Management
Authors: Don R. Hansen, Maryanne M. Mowen
2nd edition
1111824401, 978-1111824402
