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Calculating Residual Income
Forchen, Inc., provided the following information for two of its divisions for last year:
| | Small Appliances Division | Cleaning Products Division |
| Sales | $34,680,000 | $31,340,000 |
| Operating income | 2,490,100 | 1,252,500 |
| Operating assets, January 1 | 6,394,000 | 5,680,000 |
| Operating assets, December 31 | 7,530,000 | 6,350,000 |
Forchen, Inc., requires an 6 percent minimum rate of return.
Required:
1. Calculate residual income for the Small Appliances Division.
$ fill in the blank 1
2. Calculate residual income for the Cleaning Products Division.
$ fill in the blank 2
Answer & Explanation
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