Solved: What is the divisions residual income, Accounting Basics

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What is the divisions residual income

Problem: Ferro Wares is a division of a major corporation. The following data are for the latest year of operations.

Sales                                    $33,040,000
Net Operating Income              $1,453,760
Average Operating Assets        $8,000,000

The company's minimum required rate of return 18%

Required:

1) What is the division's ROI?

2) What is the division's residual income?

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Accounting Basics: What is the divisions residual income

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