Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Small Appliances Division Cleaning Products Division Sales $34,670,000 $31,320,000 Operating income 2,773,600 1,252,800 Operating assets, January 1 6,394,000 5,600,000 Operating assets, December 31 7,474,000 6,000,000 Forchen, Inc., requires an 8 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. $ fill in the blank 1 2. Calculate residual income for the Cleaning Products Division. $ fill in the blank 2 3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions? Small Appliances Division residual income would be Cleaning Products Division residual income would be
Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last year: Small Appliances Division Cleaning Products Division Sales $34,670,000 $31,320,000 Operating income 2,773,600 1,252,800 Operating assets, January 1 6,394,000 5,600,000 Operating assets, December 31 7,474,000 6,000,000 Forchen, Inc., requires an 8 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. $ fill in the blank 1 2. Calculate residual income for the Cleaning Products Division. $ fill in the blank 2 3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions? Small Appliances Division residual income would be Cleaning Products Division residual income would be
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Calculating Residual Income
Forchen, Inc., provided the following information for two of its divisions for last year:
| Small Appliances Division |
Cleaning Products Division |
|
| Sales | $34,670,000 | $31,320,000 |
| Operating income | 2,773,600 | 1,252,800 |
| Operating assets, January 1 | 6,394,000 | 5,600,000 |
| Operating assets, December 31 | 7,474,000 | 6,000,000 |
Forchen, Inc., requires an 8 percent minimum
Required:
1. Calculate residual income for the Small Appliances Division.
$ fill in the blank 1
2. Calculate residual income for the Cleaning Products Division.
$ fill in the blank 2
3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions?
| Small Appliances Division residual income would be | |
| Cleaning Products Division residual income would be |
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