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Caroline Campbell
on Oct 15, 2024

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Carter Company reported the following financial numbers for one of its divisions for the year; average total assets of $4,100,000; sales of $4,525,000; cost of goods sold of $2,550,000; and operating expenses of $1,372,000.Assume a target income of 10% of average invested assets.Compute residual income for the division:

A) $203,000.
B) $193,000.
C) $150,500.
D) $60,300.
E) $197,500.

Residual Income

The income that remains after deducting all required costs of capital from operating profits, often used to assess divisional or project performance.

Average Total Assets

A financial metric calculated by averaging a company's total assets at the beginning and end of the accounting period.

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding direct production costs, such as rent, utilities, and payroll expenses.

  • Understand the concept of residual income and how it is calculated for divisions.
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Cameron GilchristOct 16, 2024
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