Homework Answers
Answer: Given information in the question :-
Average operating assets $ 550,000
Minimum rate of return 18%
Operating income $ 125,000
Residual income ?
Computation of Residual Income of Galaxy company
Average operating assets = $ 550,000
Minimum rate of return @ 18%
Minimum required Income ($ 550,000 x 18%) = $ 99,000
Operating Income = $ 125,000
Residual Income = ($ 125,000 - $ 99,000) = $ 26,000
Therefore, Option C $ 26,000 is correct
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