The vice president of operations of Free Ride Bike Company is evaluating the performance of...
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Accounting
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 BikeDivision
Mountain BikeDivision
Sales
$4,800,000
$5,040,000
Cost of goods sold
2,112,000
2,369,000
Operating expenses
1,872,000
1,915,000
Invested assets
4,000,000
3,600,000
Required:
Question Content Area
1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no service department cost allocations.
Road Bike Division
Mountain Bike Division
Sales
$fill in the blank 21e22c057067fe3_1
$fill in the blank 21e22c057067fe3_2
Cost of goods sold
fill in the blank 21e22c057067fe3_3
fill in the blank 21e22c057067fe3_4
Gross profit
$fill in the blank 21e22c057067fe3_5
$fill in the blank 21e22c057067fe3_6
Operating expenses
fill in the blank 21e22c057067fe3_7
fill in the blank 21e22c057067fe3_8
Income from operations
$fill in the blank 21e22c057067fe3_9
$fill in the blank 21e22c057067fe3_10
Question Content Area
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.
Division
Profit Margin
Investment Turnover
ROI
Road Bike Division
fill in the blank da9edf05cfb805b_1%
fill in the blank da9edf05cfb805b_2
fill in the blank da9edf05cfb805b_3%
Mountain Bike Division
fill in the blank da9edf05cfb805b_4%
fill in the blank da9edf05cfb805b_5
fill in the blank da9edf05cfb805b_6%
3. If management's minimum acceptable return is 17%, determine the residual income for each division. If required, use the minus sign to indicate a negative income.
Division
Residual Income
Road Bike Division
$fill in the blank da9edf05cfb805b_7
Mountain Bike Division
$fill in the blank da9edf05cfb805b_8
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