Investment Center Net Income Average Assets Cameras and camcorders $ 4,500,000 $ 24,500,000 Phones and communications 3,135,000 20,900,000 Computers and accessories 950,000 16,800,000 Assume a target income of 15% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.)

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Dryomys Dryomys · Answer 1 · 2020-03-31T04:24:16+02:00

Answer:

$825,000; $0; -$1,570,000

Explanation:

For Cameras and camcorders,

Average assets = $ 24,500,000

Net income = $4,500,000

Target income = 15% of Average assets

= 0.15 × $ 24,500,000

= $3,675,000

Residual income = Net income - Target income

= $4,500,000 - $3,675,000

= $825,000

For Phones and communications,

Average assets = $20,900,000

Net income = $3,135,000

Target income = 15% of Average assets

= 0.15 × $20,900,000

= $3,135,000

Residual income = Net income - Target income

= $3,135,000 - $3,135,000

= $0

For Computers and accessories,

Average assets = $16,800,000

Net income = $950,000

Target income = 15% of Average assets

= 0.15 × $16,800,000

= $2,520,000

Residual income = Net income - Target income

= $950,000 - $2,520,000

= -$1,570,000