Question

6. Monfett Manufacturing earned operating income last year as shown in the following income statement: Sales $620,000 Cost of goods sold 316,000 Gross margin $304,000 Selling and administrative expense 219,000 Operating income $ 85,000 Less: Income taxes (at 40%) 34,000 Net income $ 51,000 At the beginning of the year, the value of operating assets was $263,000. At the end of the year, the value of operating assets was $336,000. Monfett Manufacturing requires a minimum rate of return of 15%. Total capital employed equal $350,000 and actual cost of capital is 6%. Required: Calculate the following: A. (5 points) Residual income B. (5 points) EVA

          6. Monfett Manufacturing earned operating income last year as shown in the following income
statement:
Sales
$620,000
Cost of goods sold
316,000
Gross margin
$304,000
Selling and administrative expense
219,000
Operating income
$ 85,000
Less: Income taxes (at 40%)
34,000
Net income
$ 51,000
At the beginning of the year, the value of operating assets was $263,000. At the end of the
year, the value of operating assets was $336,000. Monfett Manufacturing requires a
minimum rate of return of 15%. Total capital employed equal $350,000 and actual cost of
capital is 6%.
Required: Calculate the following:
A. (5 points) Residual income
B. (5 points) EVA

6. Monfett Manufacturing earned operating income last year as shown in the following income
statement:
Sales
620,000
Cost of goods sold
316,000
Gross margin304,000
Selling and administrative expense
219,000
Operating income
85,000
Less: Income taxes (at 40%)
34,000
Net income 51,000
At the beginning of the year, the value of operating assets was 263,000. At the end of the
year, the value of operating assets was336,000. Monfett Manufacturing requires a
minimum rate of return of 15%. Total capital employed equal $350,000 and actual cost of
capital is 6%.
Required: Calculate the following:
A. (5 points) Residual income
B. (5 points) EVA

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