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 Bike Division | Mountain Bike Division | |||
| 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 |
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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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