Worldwide Logistics provides the following information: Operating income $ 1 comma 550 comma 000 Net sales $ 14 comma 000 comma 000 Average total assets $ 2 comma 000 comma 000 Management's target rate of return 30 % What is the company's residual income?

The company's residual income is $950,000.

Explanation:

Residual Income is calculated as Operating Income less Cost of Investment.

Calculation of Residual Income:

Operating income $1,550,000

Less Cost of Investment ($2,000,000 * 30%) ($600,000)

Residual Income $950,000

Conclusion:

The company's residual income is $950,000.