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Segment Income Statement for Three Bears Papa Momma Baby Total Revenues $2,500,000 $1,415,000 $1,860,000 $5.775.000 Variable Expense Product 875,000 432,000 795,000 2,102.000 Selling and Admin. 234.000 180,000 260.000 674,000 Contribution Margin 1,391,000 803,000 805,000 2.999,000 Less traceable fixed costs 401,000 212.000 176,000 789,000 Segment Margin 990,000 591,000 629,000 2.210,000 Common fixed costs 83,000 64.000 70,000 217,000 Net operating income $907.000 $527,000 $559,000 $ $1,993,000 Included in traceable fixed costs is $50,000 of depreciation expense for Papa, $28.000 for Momma and $31,000 for Baby. The actual weighted average cost of capital for Three Bears is 8% however the company's required rate of return is 10%. Its tax rate is 40%. The Papa division balance sheet on January 1 showed $1,400,000 of assets ($250,000 current and $1,150,000 long-term) and $780,000 of liabilities ($320,000 current and $550,000 long-term). The Momma division reported $915,000 of assets ($200,000 current and $715.000 long-term) and $610,000 of liabilities ($400,000 current and $210,000 long-term). The Baby division reported $2,680,000 of assets ($525,000 current and $2,155,000 long-term) and $1,450,000 in liabilities ($375,000 current and $1,075,000 long term). At the end of the year, Papa's had assets of $1,980,000 ($300,000 current and $1,680,000 long term) and liabilities of $720,000 ($315,000 current and $405,000 long term). Momma's assets at the end of the year were $1,212,000 ($160,000 current and $1,052,000 long term) and liabilities of $435,000 ($158,000 current and $277,000 long term). Baby's assets at the end of the year were $3,340,000 ($613,000 current and $2,721,000 long term) and liabilities of $1,300,000 ($400,000 current and $900,000 long-term). The division manager for Papa has had an average ROI of 25% for the past 6 years, the manager of Momma is only in her fourth year as manager of the Little Division but last year had an ROI of 32%; the manager of the Baby division has been in the job for 2 years and last year had an ROI of 18%. In evaluating residual income for the overall division, the company uses average asset for the amount invested. For each of the three divisions compute: 1. ROI 2. RI 3. EVA 4. Which division is performing better? Explain. Segment Income Statement for Three Bears Papa Momma Baby Total Revenues $2,500,000 $1,415,000 $1,860,000 $5.775.000 Variable Expense Product 875,000 432,000 795,000 2,102.000 Selling and Admin. 234.000 180,000 260.000 674,000 Contribution Margin 1,391,000 803,000 805,000 2.999,000 Less traceable fixed costs 401,000 212.000 176,000 789,000 Segment Margin 990,000 591,000 629,000 2.210,000 Common fixed costs 83,000 64.000 70,000 217,000 Net operating income $907.000 $527,000 $559,000 $ $1,993,000 Included in traceable fixed costs is $50,000 of depreciation expense for Papa, $28.000 for Momma and $31,000 for Baby. The actual weighted average cost of capital for Three Bears is 8% however the company's required rate of return is 10%. Its tax rate is 40%. The Papa division balance sheet on January 1 showed $1,400,000 of assets ($250,000 current and $1,150,000 long-term) and $780,000 of liabilities ($320,000 current and $550,000 long-term). The Momma division reported $915,000 of assets ($200,000 current and $715.000 long-term) and $610,000 of liabilities ($400,000 current and $210,000 long-term). The Baby division reported $2,680,000 of assets ($525,000 current and $2,155,000 long-term) and $1,450,000 in liabilities ($375,000 current and $1,075,000 long term). At the end of the year, Papa's had assets of $1,980,000 ($300,000 current and $1,680,000 long term) and liabilities of $720,000 ($315,000 current and $405,000 long term). Momma's assets at the end of the year were $1,212,000 ($160,000 current and $1,052,000 long term) and liabilities of $435,000 ($158,000 current and $277,000 long term). Baby's assets at the end of the year were $3,340,000 ($613,000 current and $2,721,000 long term) and liabilities of $1,300,000 ($400,000 current and $900,000 long-term). The division manager for Papa has had an average ROI of 25% for the past 6 years, the manager of Momma is only in her fourth year as manager of the Little Division but last year had an ROI of 32%; the manager of the Baby division has been in the job for 2 years and last year had an ROI of 18%. In evaluating residual income for the overall division, the company uses average asset for the amount invested. For each of the three divisions compute: 1. ROI 2. RI 3. EVA 4. Which division is performing better? Explain