Zorin Industries, based in Sweden, uses a number of performance criteria to evaluate its foreign operations, including return on investment. Madrigal Electromotive GmbH, its German subsidiary, prepared the income statement shown below for the current fiscal year (translated to Swedish krona equivalents):

Madrigal Electromotive GmbH Income Statement

Sales		8,400,000,000
Other income		240,000,000
		8,640,000,000
Costs and expenses:
Cost of goods sold	5,760,000,000
Selling and administrative expense	594,000,000
Depreciation expense	288,000,000
Interest expense	291,600,000
Foreign exchange losses	662,400,000	7,596,000,000
Income before taxes		1,044,000,000
Income taxes		198,360,000
Net income		845,640,000

Madrigals sales figure includes sales of capacitors worth 1,000,000,000 krona (arms length sales price per unit times the number of units) that Madrigal sold to its sister subsidiary in Slovakia at a transfer price set by Zorin at 40 percent above the arms-length price per unit. Cost of goods sold includes excess labor costs of 270,000,000 krona, reflecting the need to comply with restrictive local labor laws that limit Madrigals ability to fire underperforming or redundant employees. Administrative expenses include general corporate expenses of 90,000,000 krona, which Zorin allocates to Madrigal.

Zorin corporate headquarters in Stockholm makes all decisions on financing and on matters related to tax planning. Zorin assesses Madrigal a capital charge based on Madrigals net assets and the parent companys (i.e. Zorins) average cost of capital. This figure, which amounts to 216,000,000 krona, is included in the 291,600,000-krona interest expense figure. Transactions losses resulting from Madrigals export activities account for one-half of the exchange gains and losses figure. The balance is due to translating the German accounts to Swedish krona for consolidation purposes. Zorin corporate headquarters handles all aspects of foreign exchange risk management.

Required:

Based on the information delineated above, prepare an income statement based on controllable profit that Zorin management may use to evaluate the performance of the manager of Madrigal for the current year.