Dartford Company reported the following financial data for one of its divisions for the year; average investment center total assets of $5,100,000; investment center income $850,000; a target income of 12% of average invested assets. The residual income for the division is:

$238,000

Explanation:

Datford company reported the following financial data

Total assessment of $5,100,000

Investment center income of $850,000

Target income of 12%

Therefore the residual income for this division can be calculated as follows

= $5,100,000 × 12/100

= $5,100,000 × 0.12

= $612,000

$850,000-$612,000

= $238,000

Hence the residual income is $238,000

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: