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Check my work 7 Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Com

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Answer #1

For consumer division

Residual income = Divisional income - (Divisional investment x Cost of capital)

= 3,850 - (27,500 x 11%)

= $3,850 - 3,025

= $825

For commercial division

Residual income = Divisional income - (Divisional investment x Cost of capital)

= 3,885 - (27,750 x 11%)

= 3,885 - 3,052.5

= $832.5

Since residual income of commercial division is higher, hence commercial division performed better.

Please ask if you have any query related to the question. Thank you

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