1. Cabell Products is a division of a major corporation. Last year the division had total sales of $27,170,000, net operating income of $2,662,660, and average operating assets of $8,151,000. The company's minimum required rate of return is 12%.

The division's residual income is closest to:

Multiple Choice

I will make sure to rate it as good if you answer it completely.

• $1,684,540
• $2,662,660
• $(1,956,240)
• $3,640,780

  2.

  Financial data for Beaker Company for last year appear below:

  Beaker Company
  Statements of Financial Position
  	Beginning Balance			Ending Balance
  Assets:
  Cash	$	271,000		$	326,100
  Accounts receivable		168,000			198,000
  Inventory		248,000			292,000
  Plant and equipment (net)		490,000			424,000
  Investment in Cedar Company		260,000			339,000
  Land (undeveloped)		330,000			330,000
  Total assets	$	1,767,000		$	1,909,100
  Liabilities and owners' equity:
  Accounts payable	$	176,000		$	228,000
  Long-term debt		862,000			862,000
  Owners' equity		729,000			819,100
  Total liabilities and owners' equity	$	1,767,000		$	1,909,100

  Beaker Company
  Income Statement
  Sales				$	2,440,000
  Less operating expenses					1,952,000
  Net operating income					488,000
  Less interest and taxes:
  Interest expense	$	99,500
  Tax expense		146,400			245,900
  Net income				$	242,100

  The company paid dividends of $152,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

  Required:

  a. Compute the company's margin, turnover, and return on investment for last year.

  b. The Board of Directors of Beaker Company has set a minimum required return of 35%. What was the company's residual income last year?