US CMA Part 1 · Chapter 3 · Question 22 of 30
A division has operating income of $360,000 and average invested capital of $2,400,000. The company's required rate of return is 11%. What is the division's residual income?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $96,000
Explanation
Residual income = operating income - (required rate x invested capital) = $360,000 - (11% x $2,400,000) = $360,000 - $264,000 = $96,000.
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