Assume the Apple division of the Gala Company had the following results last year (in thousands). Managements required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%. What is Apple division's residual income

$50,000

Explanation:

The computation of the residual income for each division is shown below:

As we know that

Residual income = Operating income - target income

where,  

Operating income is given in the question  

And, the target income could be calculated by

= Average invested assets × required rate of return

= $4,500,000 × 10%

= $450,000

So, the residual income is

= $500,000 - $450,000

= $50,000

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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