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 A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets available to the center.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	$3,300,000		$3,600,000		$3,180,000
Cost of goods sold	2,010,000		2,230,000		1,880,000
Operating expenses	630,000		794,000		409,600
Invested assets	3,000,000		4,000,000		5,300,000

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 The costs of services provided by an internal service department and transferred to a responsibility center.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	$	$	$

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2. Using the An expanded expression of return on investment determined by multiplying the profit margin by the investment turnover.DuPont formula for A measure of managerial efficiency in the use of investments in assets, computed as income from operations divided by invested assets.rate of return on investment, compute the A component of the rate of return on investment, computed as the ratio of income from operations to sales.profit margin, A component of the rate of return on investment, computed as the ratio of sales to invested assets.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

(A) Cereal

(B) Snack Cake

(C) Retail Bakeries

Division first.