Mike Corporation uses residual income to evaluate the performance of its divisions. The company's minimum required rate of return is 14%. In January, the Commercial Products Division had average operating assets of $790,000 and net operating income of $148,700. What was the Commercial Products Division's residual income in January

The Commercial Products Division's Residual income in January is                              $ 37,400.

Explanation:

Residual income (which is a Managerial Accounting concept) is what remains from a departments income after the opportunity cost of the capital that it deploys has been removed.

The formula is given below:

Residual Income (RI) = Controllable Margin (CM) - Required Rate of Return (RRR) × Average Operating Assets (AOR)

Step I:

Insert all the given factors

RI = 148,000 - (14% x 790,000)

RI = 148,000 - 110600

Therefore, residual income RI = $ 37,400

Cheers!

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.