COST ACCOUNTING
RESPONSIBILITY ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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net profit-(percentage of minimum profit)
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net profit-(percentage of minimum sales x average of operating assets)
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net profit-(percentage of minimum required rate x average operating assets)
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net profit-(percentage of minimum required rate)
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Detailed explanation-1: -Residual income in this case may be used to assess the performance of a capital investment, a team, a department, or a business unit. The calculation of residual income is as follows: Residual income = operating income-(minimum required return x operating assets).
Detailed explanation-2: -RI = Net Income – Equity Charge Simply put, the residual income is the net profit that’s been altered depending on the cost of equity. The equity charge is computed by multiplying the cost of equity and the company’s equity capital.
Detailed explanation-3: -Residual income is calculated as net operating income minus the product of average operating assets times the minimum required rate of return: Essentially RI measures the dollar amount of profits in excess of a required rate of return (commonly referred to as capital charge which is usually set my management).
Detailed explanation-4: -A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.