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Determine the residual income for each division

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Reference no: EM13492100

The sales, income from operations, and invested assets for each division of Winston Company are as follows:

 


Sales

Income from
Operations

Invested
Assets

Division C

$5,000,000

$630,000

$3,900,000

Division D

6,800,000

760,000

4,300,000

Division E

3,750,000

750,000

7,250,000





Management has established a minimum rate of return for invested assets of 8%.

(a)

Determine the residual income for each division.

 

 

(b)

Based on residual income, which of the divisions is the most profitable?

 

Reference no: EM13492100

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