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: Cereal Division Snack Cake Division Retail Bakeries Division Sales $25,900,000 $8,100,000 $9,800,000 Cost of goods sold 16,620,000 5,560,000 6,700,000 Operating expenses 7,726,000 1,973,000 2,414,000 Invested assets 10,360,000 2,025,000 6,533,333 The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. 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 final answers to one decimal place. 3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)?
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: Cereal Division Snack Cake Division Retail Bakeries Division Sales $25,900,000 $8,100,000 $9,800,000 Cost of goods sold 16,620,000 5,560,000 6,700,000 Operating expenses 7,726,000 1,973,000 2,414,000 Invested assets 10,360,000 2,025,000 6,533,333 The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. 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 final answers to one decimal place. 3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
|
|
Cereal Division
|
Snack Cake Division
|
Retail Bakeries Division
|
| Sales | $25,900,000 | $8,100,000 | $9,800,000 |
| Cost of goods sold | 16,620,000 | 5,560,000 | 6,700,000 |
| Operating expenses | 7,726,000 | 1,973,000 | 2,414,000 |
| Invested assets | 10,360,000 | 2,025,000 | 6,533,333 |
The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations.
| Required: | |
| 1. | Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. |
| 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 final answers to one decimal place. |
| 3. | If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)? |
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