Question
Operating Income For Segments Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a
Operating Income For Segments Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands): Home Restaurant Specialty Sales $4,130 $3,600 $2,520 Cost of goods sold 2,900 2,620 1,700 Selling and administrative expenses 950 410 320 The income tax rate for Xenold, Inc., is 40 percent. Xenold, Inc., has two sources of financing: bonds paying 5 percent interest, which account for 25 percent of total investment, and equity accounting for the remaining 75 percent of total investment. Xenold, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Xenold stock has an opportunity cost of 5 percent over the 4 percent long-term government bond rate. Xenolds total capital employed is $5.04 million ($2,700,000 for the Home Division, $1,600,000 for the Restaurant Division, and the remainder for the Specialty Division). Required: 1. Prepare a segmented income statement for Xenold, Inc., for last year. Enter the amounts in thousands. Xenold, Inc.
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