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9SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 1358

Short Answer

Refer to the information in Short Exercise S24-7. Compute each division’s RI. Interpret your results. Are your results consistent with each division’s ROI?

The residual income of Snow Sports is $457,000 and for non-snow sports is $737,000. Both the divisions have positive residual income.

See the step by step solution

Step by Step Solution

Step 1 Computation of residual income Snow Sports

Step 2 Computation of residual income of Non-Snow Sports

Step 3 Interpretation of results

As computed in step 1 it is clearly visible that both the divisions have positive residual income. This means that the division is income at a rate that is more than the expectations of the management’s minimum expectations.

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