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Divisional Income Statements and Return on Investment Analysis

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	$25,000,000		$8,000,000		$9,750,000
Cost of goods sold	16,670,000		5,575,000		6,795,000
Operating expenses	7,330,000		1,945,000		2,272,500
Invested assets	10,000,000		4,000,000		6,500,000

The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

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1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.

The Crunchy Granola Company Divisional Income Statements For the Year Ended June 30, 20Y7

	Cereal Division	Snack Cake Division	Retail Bakeries Division
Sales	$fill in the blank 301873003faaff0_1	$fill in the blank 301873003faaff0_2	$fill in the blank 301873003faaff0_3
Cost of goods sold	fill in the blank 301873003faaff0_4	fill in the blank 301873003faaff0_5	fill in the blank 301873003faaff0_6
Gross profit	$fill in the blank 301873003faaff0_7	$fill in the blank 301873003faaff0_8	$fill in the blank 301873003faaff0_9
Operating expenses	fill in the blank 301873003faaff0_10	fill in the blank 301873003faaff0_11	fill in the blank 301873003faaff0_12
Operating income	$fill in the blank 301873003faaff0_13	$fill in the blank 301873003faaff0_14	$fill in the blank 301873003faaff0_15

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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 answers to one decimal place.

Division	Profit Margin	Investment Turnover	ROI
Cereal Division	fill in the blank d17925fa0043063_1 %	fill in the blank d17925fa0043063_2	fill in the blank d17925fa0043063_3 %
Snack Cake Division	fill in the blank d17925fa0043063_4 %	fill in the blank d17925fa0043063_5	fill in the blank d17925fa0043063_6 %
Retail Bakeries Division	fill in the blank d17925fa0043063_7 %	fill in the blank d17925fa0043063_8	fill in the blank d17925fa0043063_9 %

3. When faced with limited funds for expansion, management should consider an expansion of the

CerealRetail BakeriesSnack Cake

Division first.

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