Acc202 Survey of Accounting: E15-15 Eddy’s Cough Drops operates two divisions

Acc202 Survey of Accounting 
Exercise 15-15 Residual income 
Eddy’s Cough Drops operates two divisions. The following information pertains to each division for 2005. 
Division A Division B 
Sales 150,000 54,000 
Operating income 15,040 8,100 
Average operating assets 63,000 45,000 
Company’s desired rate of return 18% 18%

a. Compute each division’s residual income. 
b. Which division increased the company’s profitability more?
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