2. Using the DuPont formula, determine the profit margin, investment turnover, andreturn on investment for each division. (Round to 2nd decimal places).3. If management desires a minimum acceptable rate of return of 8%, determine theresidual income for each division.4. Discuss the evaluation of the two divisions, using the performance measuresdetermined in parts (1), (2), and (3). The vice president of operations of Moab Bike Company is evaluating theperformance of two divisions organized as investment centers. Invested assets andcondensed income statement data for the past year ending October 31, 20Y9, foreach division are as follows:Touring Bike DivisionTrail Bike Division$1,500,000900,000495,000750,000SalesCost of goods soldOperating expensesInvested assetsInstructions1. Prepare condensed divisional income statements for the year ended October 31,20Y9, assuming that there were no service department charges.Touting Bike DivisionSales1,500,000Cost of Goods Sold (900,000)Gross Profit600,000Operating Expenses(495,000)Operating Income$5,400,0004,000,000968,0003,600,000105,000Trial Bike DivisionSales5,400,000Cost of Goods Sold (4,000,000)Gross Profit1.400,000Operating Expenses(968,000)Operating Income432,000

The equation for the basic DuPont model is calculated with the help of following formula Net profit…

2. Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. (Round to 2nd decimal places). 3. If management desires a minimum acceptable rate of return of 8%, determine the residual income for each division. 4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3).

2. Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. (Round to 2nd decimal places). 3. If management desires a minimum acceptable rate of return of 8%, determine the residual income for each division. 4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.
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