Chapter 23, Problem 23.3CP

Evaluating divisional performance

The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year:

1. 1. Which division is making the best use of invested assets and should be given priority for future capital investments?
2. 2. Assuming that the minimum acceptable rate of return on new projects is 19%, would all investments that produce a return in excess of 19% be accepted by the divisions?
3. 3. Can you identify opportunities for improving the company’s financial performance?