Calculating economic value added east mullett manufacturing earned operating income last year as shown in the following income statement: sales $630,000 cost of goods sold 380,000 gross margin $250,000 selling and administrative expense 174,400 operating income $ 75,600 less: income taxes (@ 40%) 30,240 net income $ 45,360 total capital employed equaled $380,000. east mullett's actual cost of capital is 8 percent. required: calculate the eva for east mullett manufacturing. $

$14,960

Explanation:

Data provided in the question:

Sales = $630,000

Cost of goods sold = 380,000

Gross margin = $250,000

Selling and administrative expense = 174,400

Operating income = $75,600

Income taxes (@ 40%) = 30,240

Net income i.e After tax income = $45,360

Total capital employed = $380,000

East Mullett's actual cost of capital = 8 percent

Now,

EVA for East Mullett Manufacturing

= After tax income - [ Actual cost of capital × Total capital employed ]

= $45,360 - [ 8% × $380,000 ]

= $45,360 - $30,400

= $14,960

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