Determine the residual income for each division

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The sales, operating income, and invested assets for each division of Salem Company are as follows:

                           Sales Operating              Income                   Invested Assets

Division C             $4,000,000                 $410,000                 $3,500,000

Division D              3,500,000                 600,000                  4,000,000

Division E               2,250,000                   780,000                 7,000,000

  • Management has established a minimum rate of return for invested assets of 11%.

Question a. Determine the residual income for each division.

Residual Income

Division C $

Division D $

Division E$

Reference no: EM132517074

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