Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I Region II $ 1,212,000 456,000 $ 1,662,000 816,000 438,000 648,000 Region III $ 2,262,000 1,146,000 868,000 Total Corporation $ 5,136,000 2,418,000 1,954,000 456,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 712,000 642,000 1,305,500 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: R&D expenditures Current liabilities Region I $174,000 114,000 Region II $ 234,000 164,000 Region III $ 474,000 214,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed?
Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I Region II $ 1,212,000 456,000 $ 1,662,000 816,000 438,000 648,000 Region III $ 2,262,000 1,146,000 868,000 Total Corporation $ 5,136,000 2,418,000 1,954,000 456,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 712,000 642,000 1,305,500 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: R&D expenditures Current liabilities Region I $174,000 114,000 Region II $ 234,000 164,000 Region III $ 474,000 214,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Revenues
Cost of sales
Selling, General and
Administrative (all fixed)
Corporate overhead
Region I
Region II
$ 1,212,000
456,000
$ 1,662,000
816,000
438,000
648,000
Region III
$ 2,262,000
1,146,000
868,000
Total
Corporation
$ 5,136,000
2,418,000
1,954,000
456,000
Information on the division assets in the three regions of Lauderdale Corporation follows:
Region I
Region II
Region III
$ 712,000
642,000
1,305,500
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:
R&D expenditures
Current liabilities
Region I
$174,000
114,000
Region II
$ 234,000
164,000
Region III
$ 474,000
214,000
R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years.
Required:
a. Compute economic value added for the three regions. Ignore taxes.
b. How have these regions performed?
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