Carter Company reported the following financial numbers for one of its divisions for the year

 Carter Company reported the following financial numbers for one of its divisions for the year; average assets of $4,280,000; sales of $4,705,000; cost of goods sold of $2,730,000; and operating expenses of $1,552,000. Assume a target income of 8% of average assets. Compute residual income for the division:

Multiple Choice

$38,100.


$158,000.


$33,840.


$90,600.


$80,600.

Answer

$80,600.

Explanation
$4,705,000 − 2,730,000 − 1,552,000 = $423,000; $423,000 − ($4,280,000 × 8%) = $80,600