Pine Corp. has revenues of $520,000 resulting in an operating income of $66,560.
ID: 2534036 • Letter: P
Question
Pine Corp. has revenues of $520,000 resulting in an operating income of $66,560. Invested assets total $611,000. Residual income is $24,000. Calculate the new residual income if sales increase by 10% and the profit margin and invested assets remain the same. (Do not round your intermediate calculations.)
A $0
B $30,656
C $42,560
D $10,496
Pine Corp. has revenues of $520,000 resulting in an operating income of $66,560. Invested assets total $611,000. Residual income is $24,000. Calculate the new residual income if sales increase by 10% and the profit margin and invested assets remain the same. (Do not round your intermediate calculations.)
Explanation / Answer
profit margin = 66,560/520,000 12.80% total sales = 520,000*110% 572000 profit on new sales 572000*12.8% 73216 Residual income net operating income -(Average operating asset* min rate of return) 24000 = 66,560 - (611000*x%) x = 6.97% or 66,560 - 42560 = 24000 new residual income 73,216 - (611000*6.97%) 73216-42560 30656 option B) $30,656 answer