Assume That Divisional Income from Operations Amounts to $215,000, and Top

question 23

Multiple Choice

Assume that divisional income from operations amounts to $215,000, and top management has established 15% as the minimum return on divisional assets totaling $1,000,000. The residual income for the division is

• A) $65,000
• B) $215,000
• C) $635,000
• D) $150,000

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Definitions:

Depreciation Schedule

A table that outlines the annual depreciation expenses for an asset over its useful life.

Profitability Index

A financial ratio that measures the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.

Net Present Value

The gap between cash inflows' present value and cash outflows' present value during a certain period.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded over time for a fixed asset, reflecting its decrease in value.