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Calculate the residual income for the jefferson division

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Residual Income

Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results:

  Adams Division Jefferson Division
Net (after-tax) income $ 605,000   $ 315,000  
Total capital employed 4,000,000   3,250,000  

In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 8%.

Required:

1.  Calculate the residual income for the Adams Division.

2.  Calculate the residual income for the Jefferson Division.

Reference no: EM131764388

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