The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y7, are as follows: Line Item Description CerealDivision Snack CakeDivision RetailBakeries Division Sales $25,000,000 $8,000,000 $9,750,000      Cost of goods sold 16,670,000 5,575,000 6,795,000      Operating expenses 7,330,000 1,945,000 2,272,500      Invested assets 10,000,000 4,000,000 6,500,000      The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations. Required: Question Content Area 1.  Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. The Crunchy Granola CompanyDivisional Income StatementsFor the Year Ended June 30, 20Y7 Line Item Description CerealDivision Snack CakeDivision RetailBakeriesDivision Sales $Sales $Sales $Sales Cost of goods sold Cost of goods sold Cost of goods sold Cost of goods sold Gross profit $Gross profit $Gross profit $Gross profit Operating expenses Operating expenses Operating expenses Operating expenses Operating income $Operating income $Operating income $Operating income                   Question Content Area 2.  Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. If required, round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Cereal Division fill in the blank 1 of 9 % fill in the blank 2 of 9 fill in the blank 3 of 9 % Snack Cake Division fill in the blank 4 of 9 % fill in the blank 5 of 9 fill in the blank 6 of 9 % Retail Bakeries Division fill in the blank 7 of 9 % fill in the blank 8 of 9 fill in the blank 9 of 9 % 3.  When faced with limited funds for expansion, management should consider an expansion of the     Division first.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y7, are as follows:

Line Item Description Cereal
Division
Snack Cake
Division
Retail
Bakeries Division
Sales $25,000,000 $8,000,000 $9,750,000     
Cost of goods sold 16,670,000 5,575,000 6,795,000     
Operating expenses 7,330,000 1,945,000 2,272,500     
Invested assets 10,000,000 4,000,000 6,500,000     

The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

Question Content Area

1.  Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.

The Crunchy Granola CompanyDivisional Income StatementsFor the Year Ended June 30, 20Y7


Line Item Description

Cereal
Division

Snack Cake
Division
Retail
Bakeries
Division
Sales $Sales $Sales $Sales
Cost of goods sold Cost of goods sold Cost of goods sold Cost of goods sold
Gross profit $Gross profit $Gross profit $Gross profit
Operating expenses Operating expenses Operating expenses Operating expenses
Operating income $Operating income $Operating income $Operating income
       
       
 

Question Content Area

2.  Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. If required, round your answers to one decimal place.

Division Profit Margin Investment Turnover ROI
Cereal Division fill in the blank 1 of 9 % fill in the blank 2 of 9 fill in the blank 3 of 9 %
Snack Cake Division fill in the blank 4 of 9 % fill in the blank 5 of 9 fill in the blank 6 of 9 %
Retail Bakeries Division fill in the blank 7 of 9 % fill in the blank 8 of 9 fill in the blank 9 of 9 %

3.  When faced with limited funds for expansion, management should consider an expansion of the 

 

 Division first.

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