Chapter 9, Problem 5PB

Financial information for Lighthizer Trading Company for the fiscal year-ended September 30, 20xx, was collected. As part of a management training session, you have been asked to prepare an income statement format that will be used to distribute to management. Subtotals and totals are included in the information, but you will need to calculate the values.

A. In the correct format, prepare the income statement using this information:

B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $42,000 and 8% cost of capital.

C. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.