Selected Data from Chering Division's Accounting Records Revealed the Following

question 101

Multiple Choice

Selected data from Chering Division's accounting records revealed the following:
$\begin{array}{lcc}\text { Sales } & \$ 825,000 \\\text { Average investment } & \$ 440,000 \\\text { Net operating income } & \$ 66,000 \\\text { Minimum rate of return (divisional cost of capital) } & 14 \%\end{array}$ If the minimum rate of return (i.e., cost of capital) was 13%, Chering Division's residual income (RI) would calculate to be:

• A)$4,400.
• B)$8,800.
• C)$9,240.
• D)$22,380.
• E)$49,500.

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Definitions:

Net Income

The amount of money a company retains as profit after removing expenses and taxes from its revenue.

Sales Growth

The increase in sales over a specific period, indicating the health and scalability of a business.

Costs Percentage

The proportion of costs (operational, production, etc.) relative to some base measure, such as sales.

Fixed Assets

Long-term tangible property or equipment that a company owns and uses in its operations to generate income.