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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![PR 24-5A Divisional performance analysis and evaluation
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:
OBJ. 4
Business Division
Consumer Division
Sales
$2,500,000
1,320,000
$2,550,000
1,350,000
Cost of goods sold
Operating expenses
Invested assets
930,000
843,000
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 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.](/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:PR 24-5A Divisional performance analysis and evaluation
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:
OBJ. 4
Business Division
Consumer Division
Sales
$2,500,000
1,320,000
$2,550,000
1,350,000
Cost of goods sold
Operating expenses
Invested assets
930,000
843,000
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 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.
![Question 1
PAVONE COMPANY
Divisional Income Statements
For the Year Ended December 31, 2021
Business
Consumer
Division
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
Consumer
Division
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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