West Mullet Manufacturing earned operating income last year as shown in the following income statement:...
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Accounting
West Mullet Manufacturing earned operating income last year as shown in the following income statement:
SalesP3,750,000
Cost of goods sold2,250,000
Gross margin1,500,000
Selling and administrative expenses1,200,000
Operating income300,000
Less:Income tax (@40%)120,000
Net incomeP180,000
At the beginning of the year, the value of operating assets was P1,600,000.At the end of the year, the value of operating assets was P1,400,000.
1.Calculate the average operating assets, margin, turnover, and return on investment.
2.Calculate the average operating assets and residual income if West Mullet requires a minimum rate of return of 5%.
3.Calculate the EVA for West Mullet assuming that the total capital employed equaled P1,200,000 and that the actual cost of capital is 4%.
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