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Managerial Accounting

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Calculating Residual Income: Paddy Hope

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Paddy Hope Industries sells specialty baked cakes, cupcakes, and other goods. Paddy's investment information is as follows:

Average operating assets: \$50,000
Controllable (operating) margin: \$15,000
Contribution margin: \$27,000
Required minimum rate of return: 12%

What is Paddy Hope's Residual Income?