Question - The owner of Shrek Toys has recently expanded his business in order to add an additional product line. In addition to toys, the company now sells shirts. The company has a minimum rate of return of 12%.
Toys Shirts
Sales $600,000 $200,000
Controllable margin 120,000 10,000
Average operating assets 900,000 200,000
Instructions - Compute the residual income for both investment centers.