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.

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. Investe assets and condensed income statement data for the past year for each division are as follows: Sales Cost of goods sold Operating expenses Invested assets Required: Road Bike Division $ 5,610,000 2,468,000 2,076,100 5,100,000 Mountain Bike Division $ 5,880,000 2,764,000 1,763,600 4,200,000 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 Cost of goods sold Gross profit Operating expenses Income from operations

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Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales $1,980,000  Cost of goods sold (891,000) Gross profit $1,089,000  Administrative expenses (594,000) Operating income $495,000  The manager of the Consumer Products Division is considering ways to increase the return on investment. a.  Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $3,300,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin fill in the blank 1 % Investment turnover fill in the blank 2 Return on investment fill in the blank 3 % b.  If expenses could be reduced by $99,000 without decreasing sales, what would be the impact on…