Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no service department charges. Free Ride Bike Company Divisional Income Statements For the Year Ended December 31, 20Y7 Road Bike Division Mountain Bike Division Sales $fill in the blank 747434fe2fcbfee_1 $fill in the blank 747434fe2fcbfee_2 Cost of goods sold fill in the blank 747434fe2fcbfee_3 fill in the blank 747434fe2fcbfee_4 Gross profit $fill in the blank 747434fe2fcbfee_5 $fill in the blank 747434fe2fcbfee_6 Operating expenses fill in the blank 747434fe2fcbfee_7 fill in the blank 747434fe2fcbfee_8 Income from operations $fill in the blank 747434fe2fcbfee_9 $fill in the blank 747434fe2fcbfee_10 2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and rate of 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 f534b407a016015_1% fill in the blank f534b407a016015_2 fill in the blank f534b407a016015_3% Mountain Bike Division fill in the blank f534b407a016015_4% fill in the blank f534b407a016015_5 fill in the blank f534b407a016015_6% 3. If management desires a minimum acceptable return of 16%, determine the residual income for each division. If required, use the minus sign to indicate a negative income. Division Residual Income Road Bike Division $fill in the blank f534b407a016015_7 Mountain Bike Division $fill in the blank f534b407a016015_8 4. On the basis of income from operations, the Division is the more profitable of the two divisions. However, income from operations consider the amount of invested assets in each division. On the basis of residual income, the Division is the more profitable of the two divisions.
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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:
Road Bike Division Mountain Bike Division Sales $ 3,190,000 $ 3,360,000 Cost of goods sold 1,404,000 1,579,000 Operating expenses 1,275,600 1,344,200 Invested assets 2,900,000 2,400,000 Required:
1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no service department charges.
Free Ride Bike Company Divisional Income Statements For the Year Ended December 31, 20Y7 Road Bike Division Mountain Bike Division Sales $fill in the blank 747434fe2fcbfee_1 $fill in the blank 747434fe2fcbfee_2 Cost of goods sold fill in the blank 747434fe2fcbfee_3 fill in the blank 747434fe2fcbfee_4 Gross profit $fill in the blank 747434fe2fcbfee_5 $fill in the blank 747434fe2fcbfee_6 Operating expenses fill in the blank 747434fe2fcbfee_7 fill in the blank 747434fe2fcbfee_8 Income from operations $fill in the blank 747434fe2fcbfee_9 $fill in the blank 747434fe2fcbfee_10 2. Using the DuPont formula for
return on investment , determine the profit margin, investment turnover, andrate of 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 f534b407a016015_1% fill in the blank f534b407a016015_2 fill in the blank f534b407a016015_3% Mountain Bike Division fill in the blank f534b407a016015_4% fill in the blank f534b407a016015_5 fill in the blank f534b407a016015_6% 3. If management desires a minimum acceptable return of 16%, determine the residual income for each division. If required, use the minus sign to indicate a negative income.
Division Residual Income Road Bike Division $fill in the blank f534b407a016015_7 Mountain Bike Division $fill in the blank f534b407a016015_8 4. On the basis of income from operations, the Division is the more profitable of the two divisions. However, income from operations consider the amount of invested assets in each division. On the basis of residual income, the Division is the more profitable of the two divisions.
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