Biddle Company uses EVA to evaluate the performance of division managers. For the Wallace Division, after -
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Biddle Company uses EVA to evaluate the performance of division managers. For the Wallace Division, aftertax divisional income was $ in year
The company adjusts the aftertax income for advertising expenses. First, it adds the annual advertising expenses back to aftertax divisional income. Second, the company managers believe that advertising has a threeyear positive effect on the sale of the companys products, so it amortizes advertising over three years. Advertising expenses in year will be expensed percent, percent in year and percent in year Advertising expenses in year will be expensed percent, percent in year and percent in year Advertising expenses in year will be amortized percent, percent in year and percent in year Third, unamortized advertising expenses become part of the divisional investment in the EVA calculations. Wallace Division incurred advertising expenses of $ in year and $ in year It incurred $ of advertising in year
Before considering the unamortized advertising, the Wallace Division had total assets of $ and current liabilities of $ at the beginning of year Biddle Company calculates EVA using the divisional investment at the beginning of the year. The company uses a percent cost of capital to compute EVA.
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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