Zachs,a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:1(Clickthe icon to view the information.) Calculate each division's RI. Interpret your results. First, select the formula to calculate residual income (RI). (1) –((2) ×(3) )=RI The residential division's RI is .The professional division's RI is .(4) exceeding management's expectations.1: Data Table Net Sales RevenueOperating IncomeAverage Total AssetsResidential$570,000$64,600$190,000Professional1,090,000164,000400,000 Management has a27%target rate of return for each division.(1) Asset turnover ratio Average total assets Net sales revenue Operating income Target rate of return(2) Asset turnover ratio Average total assets Net sales revenue Operating income Target rate of return(3) Asset turnover ratio Average total assets Net sales revenue Operating income Target rate of return(4) Both divisions are Neither division is Only the professional division is Only the residential division is

Residual income is a method of valuing the company, based on the surplus amount of income operating…

Answered: Zachs, a national manufacturer of…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 9E: A manufacturing company has two service and two production departments. Human Resources and Machine...

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Zachs,

a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:

1(Click

the icon to view the information.)

Calculate each division's RI. Interpret your results.

First, select the formula to calculate residual income (RI).

(1)

–

(

(2)

(3)

)

The residential division's RI is

The professional division's RI is

(4)

exceeding management's expectations.

1: Data Table

	Net Sales Revenue	Operating Income	Average Total Assets
Residential	$570,000	$64,600	$190,000
Professional	1,090,000	164,000	400,000

Management has a

27%

target rate of return for each division.

(1)

Asset turnover ratio

Average total assets

Net sales revenue

Operating income

Target rate of return

(2)

Asset turnover ratio

Average total assets

Net sales revenue

Operating income

Target rate of return

(3)

Asset turnover ratio

Average total assets

Net sales revenue

Operating income

Target rate of return

(4)

Both divisions are

Neither division is

Only the professional division is

Only the residential division is

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