Author Question: Nobles Corporation provided the following segment margin income statement for two of its divisions: ... (Read 18 times)

olsonmanny@gmail.com · **on:** Feb 5, 2023

Nobles Corporation provided the following segment margin income statement for two of its divisions: East and West.

East

West

Total

Revenue	$510,000	$480,000	$990,000
Variable expenses
Product	370,000	260,000	630,000
Selling and administrative	80,000	88,000	168,000
Contribution margin	60,000	132,000	192,000
Less traceable fixed costs	20,000	40,000	60,000
Segment margin	$ 40,000	$ 92,000	132,000
Common fixed costs			140,000
Net operating income			($ 8,000)

Nobles' actual weighted-average cost of capital is 10% and its tax rate is 30%. The East division balance sheet showed $300,000 of assets ($60,000 current and $240,000 long-term) and $320,000 of liabilities ($120,000 current and $200,000 long-term). The West division reported $360,000 of assets ($80,000 current and $280,000 long-term) and $260,000 of liabilities ($60,000 current and $200,000 long-term).

Required:

a.	Calculate the economic value added for each division.

b.	Which of the two managers will be rated higher on performance? Why?

MistyHubbard · **Reply #1 on:** Feb 5, 2023

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