Respuesta :
Answer and Explanation:
The computation of the residual income for each division is shown below:
As we know that
Residual income = Operating income - target income
where,
Operating income is given in the question
And, the target income could be calculated by
= Average invested assets × required rate of return
Now
Particulars             Beverage        Cheese
                     Division         Division
Average assets
{(Open + closing) ÷ 2}     $2,650          $4,450
Required rate of return     5%             5%
Target income           $132.50         $222.50
So, the residual income is
Particulars             Beverage        Cheese
                     Division         Division
Operating income      $364            $649
Less:
Target income        -$132.50          -$222.50
Residual income       $231.50          $426.50
