Problem - Residual Income
The income from operations and the amount of invested assets in each division of Devon Industries are as follows:
| |
Income from Operations |
Invested Assets |
| Sporting Goods Division |
$77,400 |
430,000 |
| Health Care Division |
166,000 |
830,000 |
| Commercial Division |
64,400 |
460,000 |
Assume that management has established a 12% minimum acceptable rate of return for invested assets. Determine the residual income for each division.