Calculating Economic Value AddedBarnard Manufacturing earned operating income last year as shown in the following income statement:Sales$4,000,000Cost of goods sold2,100,000Gross margin$1,900,000Selling and administrative expense1,100,000Operating income$800,000Less: Income taxes (@ 40%)320,000 Net income$480,000At the beginning of the year, the value of operating assets was $2,700,000. At the end of the year, the value of operating assets was $2,300,000.Total capital employed equaled $1,400,000. Barnard’s actual cost of capital is 12%.Required:Calculate the EVA for Barnard Manufacturing.

Answered: Calculate the EVA for Barnard…

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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Calculating Economic Value Added

Barnard Manufacturing earned operating income last year as shown in the following income statement:

Sales	$4,000,000
Cost of goods sold	2,100,000
Gross margin	$1,900,000
Selling and administrative expense	1,100,000
Operating income	$800,000
Less: Income taxes (@ 40%)	320,000
Net income	$480,000

At the beginning of the year, the value of operating assets was $2,700,000. At the end of the year, the value of operating assets was $2,300,000.

Total capital employed equaled $1,400,000. Barnard’s actual cost of capital is 12%.

Required:

Calculate the EVA for Barnard Manufacturing.

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