
1. a.
Residual Income:
The residual income is that income which is derived after deducting the return on the investment from the net income. Residual income is a favorable measure as it focuses on maximizing the return on the investment and helps in achieving the goal congruence.
The return on investment is a measure of the return which is derived from the part of the income which is invested. It is calculated by dividing the income from the investment.
Economic Value Added:
The economic value added is the excess of the income over the required return on the investment which is the residual income.
To determine: The U.S. division’s operating income for 2017.
1. b.
The Norwegian’s division’s ROI for 2017 in kroner.
2.
To explain: The top management about the division which earned better in 2017.
3.
The division which has the better residual income performance.

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Chapter 23 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
