Evaluating divisional performance The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year:

Snack Goods Cereal Frozen Foods Revenues $2,200,000 $2,520,000 $2,100,000 Operating expenses 1,366,600 1,122,000 976,800 Income from operations before service department charges $ 833,400 $1,398,000 $1,123,200 Service department charges:

Promotion $ 300,000 $ 600,000 $ 468,000 Legal 137,400 243,600 235,200 Total service department charges $ 437,400 $ 843,600 $ 703,200 Income from operations $ 396,000 $ 554,400 $ 420,000 Invested assets $2,000,000 $1,680,000 $1,750,000 1. Which division is making the best use of invested assets and should be given priority for future capital investments?

2. Assuming that the minimum acceptable rate of return on new projects is 19%, would all investments that produce a return in excess of 19% be accepted by the divisions?

3. Can you identify opportunities for improving the company’s financial performance?