Managerial Accounting

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Calculating Residual Income: Walking Gems Incorporated


Walking Gems Incorporated designs and sells specialty jewelry and cut gemstones. Walking Gem's investment information is as follows:

Average operating assets: \$5,000,000
Controllable margin (operating income): \$1,250,000
Contribution margin: \$95,000
Required minimum rate of return: 9%

What is Walking Gem's Residual Income?