It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had $51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25% Sales COGS Gross margin Operating expenses Operating income Operating assets Total assets Current liabilities East $910,000 380,000 $530,000 490,000 $40,000 West $1,100,000 660,000 $440,000 400,000 $40,000 $800,000 $500,000 $1,100,000 $830,000 $150,000 $45,000

It is the end of the third quarter, and Kimberly is evaluating the performance of two key divisions in the company. Both divisions had $51,000 cash available for investment in the fourth quarter, so Kimberly is now analyzing each division before a potential investment. She has gathered the following condensed income statements and selected information from the balance sheet for each division. The company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25% Sales COGS Gross margin Operating expenses Operating income Operating assets Total assets Current liabilities East $910,000 380,000 $530,000 490,000 $40,000 West $1,100,000 660,000 $440,000 400,000 $40,000 $800,000 $500,000 $1,100,000 $830,000 $150,000 $45,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 1CE: Forchen, Inc., provided the following information for two of its divisions for last year: Required:...

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