90.2K
Verified Solution
Link Copied!
Forchen, Inc., provided the following information for two of its divisions for last year:
| | Small Appliances Division | Cleaning Products Division |
| Sales | $34,630,000 | $31,340,000 |
| Operating income | 2,346,100 | 1,252,900 |
| Operating assets, January 1 | 6,399,000 | 5,770,000 |
| Operating assets, December 31 | 7,590,000 | 6,380,000 |
Forchen, Inc., requires an 9 percent minimum rate of return.
Required:
1. Calculate residual income for the Small Appliances Division.
$
2. Calculate residual income for the Cleaning Products Division.
$
3. What if the minimum required rate of return was 10 percent? How would that affect the residual income of the two divisions?
| Small Appliances Division residual income would be | lower. |
| Cleaning Products Division residual income would be | lower. |
Answer & Explanation
Solved by verified expert
