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Exercise 14-36 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I $ 1,220,000 460,000 450,000 R&D expenditures Current liabilities Region II $ 1,670,000 820,000 660,000 Region I $ 190,000 130,000. Region III $ 2,270,000 1,150,000 1 880,000 Revenues Cont of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 720,000 Region II Region III 650,000 1,317,500 Lauderdale Corporation has a cost of capital of 8.6 percent. The individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are included in SG&A) for the year and current liabilities for the three regions follows: Region II $ 250,000 180,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Total Corporation $ 5,160,000 2,430,000 1,990,000 472,000 Region II1 $ 490,000 230,000 Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed?

Exercise 14-36 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I $ 1,220,000 460,000 450,000 R&D expenditures Current liabilities Region II $ 1,670,000 820,000 660,000 Region I $ 190,000 130,000. Region III $ 2,270,000 1,150,000 1 880,000 Revenues Cont of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 720,000 Region II Region III 650,000 1,317,500 Lauderdale Corporation has a cost of capital of 8.6 percent. The individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are included in SG&A) for the year and current liabilities for the three regions follows: Region II $ 250,000 180,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Total Corporation $ 5,160,000 2,430,000 1,990,000 472,000 Region II1 $ 490,000 230,000 Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Exercise 14-36 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I $ 1,220,000 460,000 450,000 Region II $ 1,670,000 820,000 660,000 Region III $ 2,270,000 1,150,000 880,000 R&D expenditures Current liabilities Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 720,000 Region II Region III 650,000 1,317,500 Lauderdale Corporation has a cost of capital of 8.6 percent. The individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are included in SG&A) for the year and current liabilities for the three regions follows: Total Corporation $5,160,000 2,430,000 1,990,000 472,000 Region I $ 190,000 130,000 Region II $ 250,000 180,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Region III $ 490,000 230,000 Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed?
Transcribed Image Text:Exercise 14-36 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I $ 1,220,000 460,000 450,000 Region II $ 1,670,000 820,000 660,000 Region III $ 2,270,000 1,150,000 880,000 R&D expenditures Current liabilities Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 720,000 Region II Region III 650,000 1,317,500 Lauderdale Corporation has a cost of capital of 8.6 percent. The individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are included in SG&A) for the year and current liabilities for the three regions follows: Total Corporation $5,160,000 2,430,000 1,990,000 472,000 Region I $ 190,000 130,000 Region II $ 250,000 180,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Region III $ 490,000 230,000 Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed?
Region I Region II Region III Lauderdale Corporation has a cost of capital of 8.6 percent. The individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are included in SG&A) for the year and current liabilities for the three regions follows: $ 720,000 650,000 1,317,500 Region I Region II $ 190,000 $ 250,000 130,000 180,000 Region III $ 490,000 230,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. R&D expenditures Current liabilities Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute economic value added for the three regions. Ignore taxes. Note: Do not round your intermediate calculations. Round your answers to the nearest whole dollar amount. Economic value added $ Region I Region II Region III 116,722 $ (12,834) $ (66,919) Required B > < Required A
Transcribed Image Text:Region I Region II Region III Lauderdale Corporation has a cost of capital of 8.6 percent. The individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are included in SG&A) for the year and current liabilities for the three regions follows: $ 720,000 650,000 1,317,500 Region I Region II $ 190,000 $ 250,000 130,000 180,000 Region III $ 490,000 230,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. R&D expenditures Current liabilities Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute economic value added for the three regions. Ignore taxes. Note: Do not round your intermediate calculations. Round your answers to the nearest whole dollar amount. Economic value added $ Region I Region II Region III 116,722 $ (12,834) $ (66,919) Required B > < Required A
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