Three Bears Inc. produces various components used by many industries in the production of medical equipment. They currently have two divisions Papa Bear which manufactures components for large scale medical equipment such as MRI and X-ray machines; and Momma Bear which manufactures components for medium scale medical equipment such as centrifuges and ultrasound machines. They are preparing to open their third division - Baby Bear Division which will produce manufacturing components for small scale medical equipment such as microscopes and sphygmomanometers.

Three Bears, provided the following income statement for its current divisions: Papa and Momma

Segment Margin Income Statement for Three Bears
	Papa	Momma	Total
Revenue	$1,000,000	$620,000	$1,620,000
Variable expenses
Product	520,000	310,000	830,000
Selling and administrative	80,000	50,000	130,000
Contribution margin	400,000	260,000	660,000
Less traceable fixed costs	60,000	20,000	80,000
Segment margin	$340,000	$ 240,000	$580,000
Common fixed costs			270,000
Net operating income			$310,000

Included in traceable fixed costs is $50,000 of depreciation expense for Papa and $28,000 for Momma. The actual weighted-average cost of capital for Three Bears is 8% however the companys required rate of return is 12%. Its tax rate is 40%. The Papa division balance sheet on January 1 showed $1,300,000 of assets ($300,000 current and $1,000,000 long-term) and $820,000 of liabilities ($220,000 current and $600,000 long-term). The Momma division reported $800,000 of assets ($100,000 current and $700,000 long-term) and $550,000 of liabilities ($400,000 current and $150,000 long-term). At the end of the year, Papas had assets of $1,650,000 ($400,000 current and $1,250,000 long term) and liabilities of $600,000 ($300,000 current and $300,000 long term). Mommas assets at the end of the year were $780,000 ($110,000 current and $670,000 long term and liabilities of $590,000 ($380,000 current and $210,000 long term). The division manager for Papa has had an average ROI of 25% for the past 4 years and the manager of Momma is only in her second year as manager of the Little Division but last year had an ROI of 32%. In evaluating residual income for the overall division, the company uses average asset for the amount invested.

Part A:

For each Division compute:

1. Sales Margin
2. Asset Turnover
3. ROI
4. RI
5. EVA
6. Which division is performing better? Explain.