Residual income method

The idea of combining capital recovery into measurement of current financial performance is not new. A method called residual income has been practiced for decades. Residual income subtracts the cost of capital employed from the income statement. For example, Acme s 600,000 NC machine, described in Chapter 26, would be charged a capital cost of ownership of 90,000 (15% x 600,000) against the expected benefits. This is because Acme s hurdle rate is 15 percent. Because interest is deductible for tax purposes, many adjust the cost of capital to include the impact of taxes and asset life. 

Advice of the type noted above on avoiding adventitious contamination of food needs to be made both nationally and by management in companies involved with food. The control of pesticide residues in food could include HACCP (Chapter 11) to provide an important element of prevention. Other preventative methods include testing of incoming supplies of raw and other materials, and direction by retailers to suppliers that they must use only a defined list of pesticides in specified ways. 

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