Accounting (Text Only)
26th Edition
ISBN: 9781285743615
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 24, Problem 24.11EX
(a)
To determine
Residual income: The remaining income from operations after deducting the desired acceptable income is referred to as residual income.
Formula of residual income:
| Income from operations | XXX |
| Less minimum acceptable income from operations as a percent of invested assets | XXX |
| Residual income | XXX |
Table (1)
Residual income of for each division
(b)
To determine
The division with highest residual income
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Students have asked these similar questions
The performance of the manager of Division A is measured by residual
income. Which of the following would increase the manager's performance
measure?
a. Increase in average operating assets.
b. Decrease in average operating assets.
c. Increase in minimum required return.
d. Decrease in net operating income.
11.
The performance of the manager of Division C is evaluated by residual income. Which of the following would improve the manager's performance?
Select one:
a. Decrease in operating income.
b. Decrease in average operating assets.
c. Increase in minimum required return.
d. Increase in average operating assets.
The residual income approach to measuring divisional performance measurement is closely related to the ____________ method of performance measurement.
Select one:
a.
Internal rate of return
b.
Payback period
c.
Return on capital employed
d.
Accounting rate of return
e.
Economic value added
Chapter 24 Solutions
Accounting (Text Only)
Ch. 24 - Differentiate between centralized and...Ch. 24 - Differentiate between a profit center and an...Ch. 24 - Prob. 3DQCh. 24 - What is the major shortcoming of using income from...Ch. 24 - In a decentralized company in which the divisions...Ch. 24 - How does using the return on investment facilitate...Ch. 24 - Why would a firm use a balanced scorecard in...Ch. 24 - What is the objective of transfer pricing?Ch. 24 - When is the negotiated price approach preferred...Ch. 24 - When using the negotiated price approach to...
Ch. 24 - Budgetary performance for cost center Caroline...Ch. 24 - Budgetary performance for cost center Conley...Ch. 24 - Prob. 24.2APECh. 24 - Prob. 24.2BPECh. 24 - Prob. 24.3APECh. 24 - Prob. 24.3BPECh. 24 - Profit margin, investment turnover, and ROI Cash...Ch. 24 - Profit margin, investment turnover and ROI Briggs...Ch. 24 - Prob. 24.5APECh. 24 - Residual income The Commercial Division of Herring...Ch. 24 - Transfer pricing The materials used by the North...Ch. 24 - Transfer pricing The materials used by the...Ch. 24 - Budget performance reports for cost centers...Ch. 24 - Prob. 24.2EXCh. 24 - Prob. 24.3EXCh. 24 - Prob. 24.4EXCh. 24 - Service department charges In divisional income...Ch. 24 - Service department charges and activity bases...Ch. 24 - Divisional income statements with service...Ch. 24 - Prob. 24.8EXCh. 24 - Profit center responsibility reporting XSport...Ch. 24 - Rate of return on investment The income from...Ch. 24 - Prob. 24.11EXCh. 24 - Determining missing items in return computation...Ch. 24 - Profit margin, investment turnover, and rate of...Ch. 24 - Prob. 24.14EXCh. 24 - Determining missing items in return and residual...Ch. 24 - Determining missing items from computations Data...Ch. 24 - Prob. 24.17EXCh. 24 - Balanced scorecard for a service company American...Ch. 24 - Building a balanced scorecard Hit-n-Kun Inc. owns...Ch. 24 - Decision on transfer pricing Materials used by the...Ch. 24 - Prob. 24.21EXCh. 24 - Budget performance report for a cost center...Ch. 24 - Prob. 24.2APRCh. 24 - Prob. 24.3APRCh. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 24.6APRCh. 24 - Budget performance report for a cost center The...Ch. 24 - Prob. 24.2BPRCh. 24 - Prob. 24.3BPRCh. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 24.6BPRCh. 24 - Prob. 24.1CPCh. 24 - Prob. 24.2CPCh. 24 - Evaluating divisional performance The three...Ch. 24 - Prob. 24.4CPCh. 24 - Evaluating division performance Last Resort...
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- The operating income and the amount of invested assets in each division of Conley Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most profitable per dollar invested? Based on the data in Exercise 10 assume that management has established a 15% minimum acceptable return for invested assets. a. Determine the residual income for each division. b. Which division has the most residual income?arrow_forwardThe following selected data pertain to the Argent Division for last year: Required: 1. How much is the residual income? 2. How much is the return on investment? (Rounded to four significant digits.)arrow_forwardBased on the data in problem 24- 4 above, assume that management has established a 10%minimum acceptable rate of return for invested assets. a. Determine the residual income for each division.b. Which division has the most residual income?arrow_forward
- Select the best answer from the five listed below to fill in the blank The residual income approach to measuring divisional performance measurement is closely related to the method of performance measurement. O a. payback period O b. economic value added O c. return on capital employed O d. internal rate of return O e. accounting rate of returnarrow_forward3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.arrow_forwardUse the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.arrow_forward
- The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $96,900 510,000 Commercial Division 64,600 380,000 Internet Division 141,600 590,000 Assume that management has established a 8% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $96,900 $64,600 $141,600 Minimum acceptable of income from operations Residual income b. Which division has the most residual income? Internet Divisionarrow_forwardThe operating income and the amount of invested assets in each division of Conley Industries are as follows: Retail Division Commercial Division Internet Division Operating income Invested Assets $160,600 $730,000 120,000 600,000 124,200 690,000 Assume that management has established a 8% minimum acceptable return for invested assets. a. Determine the residual income for each division. Operating income Minimum acceptable operating income as a percent of invested assets Residual income b. Which division has the most residual income? Retail Division Retail Division Commercial Division Internet Division $160,600 $120,000 $124,200arrow_forwardThe following information is related to the current operation of Kenanga Branch. Operating income 5,000,000 Sales revenue 62, 500,000 Average operating asset 25,000,000 Average balance in current liabilities 13,400,000 The management of the company has decided that the minimum return required is 11 percent. Residual income is another approach that can be used to measure performance of an investment centre. Define residual income and determine the residual income for Kenanga Branch.arrow_forward
- Please help mearrow_forwardPlease Do not Give Image formatarrow_forwardThe operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating income Invested Assets Retail Division $123,900 $590,000 Commercial Division 182,400 760,000 Internet Division 137,800 530,000 Assume that management has established a 12% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $123,900 $182,400 $137,800 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?arrow_forward
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