Mike Corporation Uses Residual Income to Evaluate the Performance of Its

question 128

Multiple Choice

Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. In January, the Commercial Products Division had average operating assets of $970,000 and net operating income of $143,700. What was the Commercial Products Division's residual income in January?

• A) $7,900
• B) ($20,118)
• C) $20,118
• D) ($7,900)

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good suppliers are willing to sell.

Mass Transit

Public transportation systems that move large numbers of people within urban and suburban areas.

Price of Gasoline

The cost per unit volume of gasoline, typically measured in dollars per gallon or liters.

Equilibrium Price

The price at which the quantity of a product demanded by consumers and the quantity supplied by producers are equal.