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6. Compute the residual income of CBS. 7. Compute the EVA of CBS

6. Compute the residual income of CBS. 7. Compute the EVA of CBS

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6. Compute the residual income of CBS.
7. Compute the EVA of CBS

Creative Business Solutions (CBS), a division of Doug Jorgenson CPA, buys and installs modular office components. For the most recent year, the division had the following performance targets: Asset turnover 2.5 Profit margin Target rate of return on investments for RI 13% Cost of capital Income tax rate 6% 10% 40% Actual information concerning the company's performance for last year follows: Total assets at beginning of year Total assets at end of year Total invested capital (annual average). Sales $3,600,000 5,300,000 8,000,000 9,000,000 3,650,000 4,770,000 675,000 Variable operating costs Direct fixed costs Allocated fixed costs
Transcribed Image Text:Creative Business Solutions (CBS), a division of Doug Jorgenson CPA, buys and installs modular office components. For the most recent year, the division had the following performance targets: Asset turnover 2.5 Profit margin Target rate of return on investments for RI 13% Cost of capital Income tax rate 6% 10% 40% Actual information concerning the company's performance for last year follows: Total assets at beginning of year Total assets at end of year Total invested capital (annual average). Sales $3,600,000 5,300,000 8,000,000 9,000,000 3,650,000 4,770,000 675,000 Variable operating costs Direct fixed costs Allocated fixed costs
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