he vice president of operations of Pavone Company is evaluating the performance of wo divisions organized as investment centers. Invested assets and condensed income tatement data for the past year for each division are as follows: Business Division Consumer Division Sales $2,500,000 $2,550,000 Cost of goods sold Operating expenses Invested assets 1,320,000 1,350,000 930,000 843,000 1,250,000 2,125,000 nstructions . Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were no service department charges. . 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. If management desires a minimum acceptable rate of return of 17%, determine the residual income for each division.
he vice president of operations of Pavone Company is evaluating the performance of wo divisions organized as investment centers. Invested assets and condensed income tatement data for the past year for each division are as follows: Business Division Consumer Division Sales $2,500,000 $2,550,000 Cost of goods sold Operating expenses Invested assets 1,320,000 1,350,000 930,000 843,000 1,250,000 2,125,000 nstructions . Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were no service department charges. . 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. If management desires a minimum acceptable rate of return of 17%, determine the residual income for each division.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**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** | $2,500,000 | $2,550,000 |
| **Cost of goods sold** | 1,320,000 | 1,350,000 |
| **Operating expenses** | 930,000 | 843,000 |
| **Invested assets** | 1,250,000 | 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 margin, 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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2b8bb411-d3f1-485a-80bb-4c2cc88a8d28%2F0f94dbc8-787d-4672-879c-0ba56e9c4a08%2F8bvuaf_processed.png&w=3840&q=75)
Transcribed Image Text:**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** | $2,500,000 | $2,550,000 |
| **Cost of goods sold** | 1,320,000 | 1,350,000 |
| **Operating expenses** | 930,000 | 843,000 |
| **Invested assets** | 1,250,000 | 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 margin, 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.
![**Question 1**
**PAVONE COMPANY**
*Divisional Income Statements*
*For the Year Ended December 31, 2021*
| | Business Division | Consumer Division |
|--------------------------|-------------------|-------------------|
| Sales | | |
| Cost of goods sold | | |
| Gross profit | | |
| Operating expenses | | |
| Income from operations | | |
**Question 2**
- Business Division ROI:
- Consumer Division ROI:
**Question 3**
- Business Division Residual Income:
- Consumer Division Residual Income:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2b8bb411-d3f1-485a-80bb-4c2cc88a8d28%2F0f94dbc8-787d-4672-879c-0ba56e9c4a08%2F73o9rso_processed.png&w=3840&q=75)
Transcribed Image Text:**Question 1**
**PAVONE COMPANY**
*Divisional Income Statements*
*For the Year Ended December 31, 2021*
| | Business Division | Consumer Division |
|--------------------------|-------------------|-------------------|
| Sales | | |
| Cost of goods sold | | |
| Gross profit | | |
| Operating expenses | | |
| Income from operations | | |
**Question 2**
- Business Division ROI:
- Consumer Division ROI:
**Question 3**
- Business Division Residual Income:
- Consumer Division Residual Income:
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