Car Deals Inc. has two divisions: New Cars and Used Cars. The following segmented financial information is for the most recent fiscal year:

	New Cars Division	Used Car Division
Sales	$9,000,000	$18,000,000
Cost of Goods Sold	3,300,000	8,700,000
Allocated Overhead	1,050,00	2,550,000
Selling and administration expenses	585,000	630,000

The new cars division had average operating assets totaling $17,400,000 for the year, and the used cars division had average operating assets of $22,800,000. Assume the cost of capital rate is 15% and the companys tax rate is 40%.

Required:

1. Prepare a segmented income statement, including the profit margin ration for each division at the bottom of the segmented income statement.
2. Calculate return on investment (RO I) for each division.
3. Calculate residual income for each division.
4. Summarize the answers to parts a, b, and C. What does this information tell you about each division?