Question Divisional Income Statements and Rate of Return on Investment Analysis Sunshine Food 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, 2016, are as follows: The management of Sunshine Food 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 rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division. Round your answers to one decimal place. 3. When faced with limited funds for expansion, management should consider an expansion of the Division first. Cereal Division Snack Cake Division Retail Bakeries Division Sales $5,060,000 $5,400,000 $4,740,000 Cost of goods sold 3,090,000 3,350,000 2,800,000 Operating expenses 958,000 1,078,000 612,800 Invested assets 4,600,000 6,000,000 7,900,000
Question
Divisional Income Statements and Rate of Return on Investment Analysis
Sunshine Food 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, 2016, are as follows:
The management of Sunshine Food 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 rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division. Round your answers to one decimal place.
3. When faced with limited funds for expansion, management should consider an expansion of the Division first.
|
|
Cereal Division |
Snack Cake Division |
Retail Bakeries Division |
|||
|
Sales |
$5,060,000 |
|
$5,400,000 |
|
$4,740,000 |
|
|
Cost of goods sold |
3,090,000 |
|
3,350,000 |
|
2,800,000 |
|
|
Operating expenses |
958,000 |
|
1,078,000 |
|
612,800 |
|
|
Invested assets |
4,600,000 |
|
6,000,000 |
|
7,900,000 |
|
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