Divisional Income Statements and Rate of Return on Investment Analysis

Sunshine Food Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 2016, are as follows:

	Cereal Division		Snack Cake Division		Retail Bakeries Division
Sales	$6,050,000		$6,480,000		$5,700,000
Cost of goods sold	3,690,000		4,020,000		3,360,000
Operating expenses	1,150,000		904,800		858,000
Invested assets	5,500,000		7,200,000		9,500,000

The management of Sunshine Food Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.

Sunshine Food Company
Divisional Income Statements
For the Year Ended June 30, 2016
	Cereal Division	Snack Cake Division	Retail Bakeries Division
Sales	$	$	$
Cost of goods sold
Gross Profit	$	$	$
Operating expenses
Income from operations	$	$	$

2. Using the DuPont formula for rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division. Round your answers to one decimal place.

	Profit Margin	Investment Turnover	ROI
Cereal Division	%		%
Snack Cake Division	%		%
Retail Bakeries Division	%		%

3. When faced with limited funds for expansion, management should consider an expansion of the Division first.