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Major Corporation operates a wholesale electrical supply company with two locations. Each location ...

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Major Corporation operates a wholesale electrical supply company with two locations. Each location ...

Major Corporation operates a wholesale electrical supply company with two locations. Each location is evaluated as an investment center. Selected results from the latest year are as follows:

Location #1

Location #2

Sales	$600,000	$800,000
Variable expenses	460,000	660,000
Direct fixed expenses	100,000	80,000
Average assets	890,000	780,000
Current liabilities	120,000	180,000
Required rate of return	10%	12%
Weighted average cost of capital	8%	6%
Tax rate	24%	28%

Required:

a.	Calculate the residual income for Location #1.

b.	Calculate the EVA for Location #2.

Textbook

Managerial Accounting

Edition: 4^th

Author: Davis

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