Solution-Calculate current residual income for diagnostic

Calculate current residual income for diagnostic division

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Question - University Hospital provided the following income statement for two of its divisions: Diagnostic and Outpatient. Both divisions are structured as investment centers.

Segment Margin Income Statement for University Hospital
	Diagnostic	Outpatient	Total
Revenue	$500,000	$400,000	$900,000
Variable expenses
Product	220,000	140,000	360,000
Selling and administrative	150,000	80,000	230,000
Contribution margin	130,000	180,000	310,000
Less traceable fixed costs	82,000	93,000	175,000
Segment margin	$48,000	$87,000	135,000
Common fixed costs			130,000
Net operating income			$5,000

The average assets for Diagnostic and Outpatient divisions total $400,000 and $600,000, respectively. The required minimum rate of return for both divisions is 10%.

Required:

Calculate the current residual income for the Diagnostic division.

Calculate the current residual income for the Outpatient division.

Reference no: EM131824247

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Calculate current residual income for diagnostic division

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Reference no: EM131824247

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