Residual Income Is the Net Operating Income That an Investment

question 108

True/False

Residual income is the net operating income that an investment center earns above the minimum required return on the investment in fixed assets.

---

Definitions:

Direct Material

Raw materials that can be directly traced to the manufacturing of a product and are significant in cost.

Manufacturing Overhead

Consists of all indirect costs associated with the production process, including utilities, depreciation on equipment, and salaries of maintenance staff.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including expenses related to operating the manufacturing facilities.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product efficiently.