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Operating Income For Segments
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):
| | Home | Restaurant | Specialty |
| Sales | $4,130 | $3,600 | $2,550 |
| Cost of goods sold | 2,900 | 2,640 | 1,700 |
| Selling and administrative expenses | 950 | 410 | 320 |
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. Xenold's 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. Enter the amounts in thousands.
Xenold, Inc. Income Statement (in thousands) For the Year 20XX | | Home | Restaurant | Specialty | Total |
| Sales | $fill in the blank 1a1097fad04b024_1 | $fill in the blank 1a1097fad04b024_2 | $fill in the blank 1a1097fad04b024_3 | $fill in the blank 1a1097fad04b024_4 |
| Cost of goods sold | fill in the blank 1a1097fad04b024_5 | fill in the blank 1a1097fad04b024_6 | fill in the blank 1a1097fad04b024_7 | fill in the blank 1a1097fad04b024_8 |
| Gross profit | $fill in the blank 1a1097fad04b024_9 | $fill in the blank 1a1097fad04b024_10 | $fill in the blank 1a1097fad04b024_11 | $fill in the blank 1a1097fad04b024_12 |
| Selling and administrative expense | fill in the blank 1a1097fad04b024_13 | fill in the blank 1a1097fad04b024_14 | fill in the blank 1a1097fad04b024_15 | fill in the blank 1a1097fad04b024_16 |
| Division profit | $fill in the blank 1a1097fad04b024_17 | $fill in the blank 1a1097fad04b024_18 | $fill in the blank 1a1097fad04b024_19 | $fill in the blank 1a1097fad04b024_20 |
| Income taxes | fill in the blank 1a1097fad04b024_21 | fill in the blank 1a1097fad04b024_22 | fill in the blank 1a1097fad04b024_23 | fill in the blank 1a1097fad04b024_24 |
| After-tax income | $fill in the blank 1a1097fad04b024_25 | $fill in the blank 1a1097fad04b024_26 | $fill in the blank 1a1097fad04b024_27 | $fill in the blank 1a1097fad04b024_28 |
2. Calculate Xenold's weighted average cost of capital. Enter your answer as a decimal value rounded to three places. For example, 4.36% would be entered as ".044". Round your calculations to four decimal places. fill in the blank 0cb717f6601afa4_1
3. Calculate EVA for each division and for Xenold, Inc. In your computations, carry the weighted average cost of capital to three decimal places. If the EVA is negative, enter your answer as a negative amount. Enter amounts as whole dollars not in thousands.
| | EVA |
| |
| Home | $ fill in the blank 0cb717f6601afa4_2 |
| Restaurant | $ fill in the blank 0cb717f6601afa4_3 |
| Specialty | $ fill in the blank 0cb717f6601afa4_4 |
| Total | $ fill in the blank 0cb717f6601afa4_5 |
