Prepare condensed divisional income statements

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Question - Divisional Performance Analysis and Evaluation - The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows:

 

Road Bike Division

Mountain Bike Division

Sales

$2,640,000

$2,850,000

Cost of goods sold

1,162,000

1,340,000

Operating expenses

1,029,200

1,082,500

Invested assets

2,200,000

1,900,000

Required -

1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no service department cost allocations.

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

3. If management's minimum acceptable return is 16%, determine the residual income for each division. If required, use the minus sign to indicate a negative income.

Reference no: EM132995833

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