Cabell Products is a division of a major corporation. Last year the division had total sales of $11,440,000, net operating income of $686,400, and average operating assets of $2,402.400. The company's minimum required rate of return is 13%. The division's residual income is closest to: Multiple Cholce $686,400 $374,088 $(624,624) $998,712

Cabell Products is a division of a major corporation. Last year the division had total sales of $11,440,000, net operating income of $686,400, and average operating assets of $2,402.400. The company's minimum required rate of return is 13%. The division's residual income is closest to: Multiple Cholce $686,400 $374,088 $(624,624) $998,712

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 5BE: Residual income The Commercial Division of Galena Company has operating income of 12,680,000 and...

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Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands): The income tax rate for Xenold, Inc., is 40 percent. Xenold, Inc., has two sources of financing: bonds paying 5 percent interest, which account for 25 percent of total investment, and equity accounting for the remaining 75 percent of total investment. Xenold, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Xenold stock has an opportunity cost of 5 percent over the 4 percent long-term government bond rate. Xenolds total capital employed is 5.04 million (2,600,000 for the Home Division, 1,700,000 for the Restaurant Division, and the remainder for the Specialty Division). Required: 1. Prepare a segmented income statement for Xenold, Inc., for last year. 2. Calculate Xenolds weighted average cost of capital. (Round to four significant digits.) 3. Calculate EVA for each division and for Xenold, Inc. 4. Comment on the performance of each of the divisions.
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