Chapter 24, Problem 14CP

To determine

RESIDUAL INCOME (RI) : is a managerial accounting measurement used to assess and compare the relative success of business units . The basic formula for calculating RI is to multiply operating assets by the cost of capital, and then subtract this value from operating income.

$\text{AVERAGE TOTAL ASSETS}=\frac{550046+181600}{2}=365823.2$

AVERAGE TOTAL ASSETS: The average total assets is the average of the aggregate assets during a two year period.

$\text{AVERAGE TOTAL ASSETS}=\frac{\text{TOTAL ASSETS(CURRENT YEAR)+TOTAL ASSETS(PREVIOUS YEAR}}{2}$

To determine:

The residual income (RI).