Divisional performance analysis and evaluation The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Line Item Description Road Bike Division Mountain Bike Division Sales $3,080,000 $3,220,000 Cost of goods sold 1,355,000 1,513,000 Operating expenses 1,170,600 1,224,000 Invested assets 2,800,000 2,300,000 Required: Question Content Area 1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations. Free Ride Bike CompanyDivisional Income StatementsFor the Year Ended December 31, 20Y7 Line Item Description Road Bike Division Mountain Bike Division Sales $Sales $Sales Cost of goods sold Cost of goods sold Cost of goods sold Gross profit $Gross profit $Gross profit Operating expenses Operating expenses Operating expenses Operating income $Operating income $Operating income Feedback Area Feedback 1. For each division, subtract operating expenses from gross profit. Question Content Area 2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each division. If required, round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Road Bike Division fill in the blank 1 of 6% fill in the blank 2 of 6 fill in the blank 3 of 6% Mountain Bike Division fill in the blank 4 of 6% fill in the blank 5 of 6 fill in the blank 6 of 6% 3. If management desires a minimum acceptable rate of return of 16%, determine the residual income for each division. Division Residual Income Road Bike Division fill in the blank 1 of 2$ Mountain Bike Division fill in the blank 2 of

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 5PB: Divisional performance analysis and evaluation The vice president of operations of Free Ride Bike...

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Line Item Description	Road Bike Division	Mountain Bike Division
Sales	$3,080,000	$3,220,000
Cost of goods sold	1,355,000	1,513,000
Operating expenses	1,170,600	1,224,000
Invested assets	2,800,000	2,300,000

Question Content Area

1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations.

Free Ride Bike CompanyDivisional Income StatementsFor the Year Ended December 31, 20Y7

Line Item Description	Road Bike Division	Mountain Bike Division
Sales	$Sales	$Sales
Cost of goods sold	Cost of goods sold	Cost of goods sold
Gross profit	$Gross profit	$Gross profit
Operating expenses	Operating expenses	Operating expenses
Operating income	$Operating income	$Operating income

Feedback Area

Feedback

1. For each division, subtract operating expenses from gross profit.

Question Content Area

2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each division. If required, round your answers to one decimal place.

Division	Profit Margin	Investment Turnover	ROI
Road Bike Division	fill in the blank 1 of 6%	fill in the blank 2 of 6	fill in the blank 3 of 6%
Mountain Bike Division	fill in the blank 4 of 6%	fill in the blank 5 of 6	fill in the blank 6 of 6%

3. If management desires a minimum acceptable rate of return of 16%, determine the residual income for each division.

Division	Residual Income
Road Bike Division	fill in the blank 1 of 2$
Mountain Bike Division	fill in the blank 2 of 2$

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