38. Segmented Net Income, ROI, and RI. Custom Auto Company has two divisionsEast and West. The following segmented financial information is for the most recent fiscal year: East Division West Division Sales $2,000,000 $4,000,000 Cost of goods sold 800,000 2,040,000 Allocated overhead 600,000 1,200,000 Selling and administrative expenses 360,000 380,000

39. The East division had average operating assets totaling $1,800,000 for the year, and the West division had average operating assets of $2,600,000. Assume the cost of capital rate is 8 percent, and the companys tax rate is 30 percent. Division managers are responsible for sales, costs, and investments in assets.

40. Required:

a. What type of responsibility center is each division at Custom Auto Company? Explain.

b. Prepare a segmented income statement using the format presented in . Include the profit margin ratio for each division at the bottom of the segmented income statement.

c. Calculate ROI for each division.

d. Calculate RI for each division.

e. Summarize the answers to parts a, b, and c using the format presented in . What does this information tell us about each division?