Calculate the Residual Income (RI) for each of the following segments. Segment 1 Segment 2&nbs

Calculate the Residual Income (RI) for each of the following segments.

Segment 1 Segment 2 Segment 3

Income $ 180,000 $ 1,000,000 $ 500,000

Investment 2,000,000 5,000,000 2,000,000

Minimum Income (10%) 200,000 500,000 200,000

Expert Solution

Residual Income is the income in excess of minimum income.

Calculation of residual income is as follows:

			Segment 1	Segment 2	Segment 3
	Income	a	$ 1,80,000	$ 10,00,000	$ 5,00,000

	Investment	b	$ 20,00,000	$ 50,00,000	$ 20,00,000
	Minimum Income	c=b*10%	$ 2,00,000	$ 5,00,000	$ 2,00,000

	Residual Income	a-c	0	$ 5,00,000	$ 3,00,000


In the case of Segment 1, income is less than minimum income.So there is no residual income because residual income is in the excess of minimum income.

ekkarill92 answered 2 years ago

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