Chapter 24 Homework PR 24-5A Divisional performance analysis and evaluation OBJ. 4 The vice president of operations of Pavone 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: Business Division Consumer Division Sales Cost of goods sold Operating expenses Invested assets $2,500,000 1,320,000 930,000 1,250,000 $2,550,000 1,350,000 843,000 2,125,000 Instructions 1. Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were no service department charges. 2. Using the DuPont formula for rate of return on investment, determine the profit mar- gin, investment turnover, and rate of return on investment for each division. 3. If management desires a minimum acceptable rate of return of 17%, determine the residual income for each division.

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Chapter1: Financial Statements And Business Decisions
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Chapter 24 Homework
PR 24-5A Divisional performance analysis and evaluation
OBJ. 4
The vice president of operations of Pavone 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:
Business Division Consumer Division
Sales
Cost of goods sold
Operating expenses
Invested assets
$2,500,000
1,320,000
930,000
1,250,000
$2,550,000
1,350,000
843,000
2,125,000
Instructions
1. Prepare condensed divisional income statements for the year ended December 31,
2016, assuming that there were no service department charges.
2. Using the DuPont formula for rate of return on investment, determine the profit mar-
gin, investment turnover, and rate of return on investment for each division.
3. If management desires a minimum acceptable rate of return of 17%, determine the
residual income for each division.
Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage.
Transcribed Image Text:Chapter 24 Homework PR 24-5A Divisional performance analysis and evaluation OBJ. 4 The vice president of operations of Pavone 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: Business Division Consumer Division Sales Cost of goods sold Operating expenses Invested assets $2,500,000 1,320,000 930,000 1,250,000 $2,550,000 1,350,000 843,000 2,125,000 Instructions 1. Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were no service department charges. 2. Using the DuPont formula for rate of return on investment, determine the profit mar- gin, investment turnover, and rate of return on investment for each division. 3. If management desires a minimum acceptable rate of return of 17%, determine the residual income for each division. Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage.
Divisional Income Statements
For the Year Ended December 31, 2021
PAVONE COMPANY
Sales
Cost of goods sold
Gross profit
Operating expenses
Income from operations
Question 2
Question 3
Business Division ROI
Consumer Division ROI
Business Division Residual Income
Consumer Division Residual Income
Business
Division
Consumer
Division
Transcribed Image Text:Divisional Income Statements For the Year Ended December 31, 2021 PAVONE COMPANY Sales Cost of goods sold Gross profit Operating expenses Income from operations Question 2 Question 3 Business Division ROI Consumer Division ROI Business Division Residual Income Consumer Division Residual Income Business Division Consumer Division
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