Pool Accessories, Inc., has two divisions—Furniture and Supplies. Assume for both divisions that the tax rate is 30 percent, and the cost of capital is 8%. The following segmented financial information is for the most recent fiscal year ended December 31. Furniture Division

Supplies Division

Sales

$3,000,000

$1,000,000

Cost of goods sold

1,600,000

430,000

Allocated overhead

375,000

125,000

Selling and administrative expenses

250,000

200,000

Average net operating assets

$8,500,000

2,100,000

a)Prepare a segmented income statement using the format presented in Figure 11.3 "Segmented Income Statements (Game Products, Inc.)". Include the profit margin ratio for each division at the bottom of the segmented income statement.

b)Using net income as the measure, which division is most profitable? Explain why this conclusion might be misleading.

c)Using profit margin as the measure, which division is most profitable?

d)Using ROI as the measure, which division is most profitable?

e)Using RI as the measure, which division is most profitable?

f)Using EVA as the measure, which division is most profitable? For the EVA calculation, the only adjustment to be made to net income is to deduct taxes. No adjustments are required for assets.