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Compute the residual income for Shirt investment center

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Question - The owner of Shrek Toys has recently expanded his business in order to add an additional product line. In addition to toys, the company now sells shirts. The company has a minimum rate of return of 12%.

Sales

TOYS $600,000

SHIRTS $200,000

Controllable margin

TOYS 120,000

SHIRTS 10,000

Average operating assets

TOYS 900,000

SHIRTS 200,000

Required -

a. Compute the residual income for Toy investment center.

b. Compute the residual income for Shirt investment center.

Reference no: EM132827854

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