Divisional income statements and return on investment analysis

E$.$F$.$ Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June $30,20$Y$8,$ are as follows:

Line Item Description

Mutual Fund

Division Electronic

Brokerage

Division Investment

Banking

Division

Fee revenue $$2,540,000$ $$2,630,000$ $$2,560,000$

Operating expenses $1,368,2001,105,4001,936,000$

Invested assets $9,300,0007,700,0005,200,000$

The management of E$.$F$.$ Lynch Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

Question Content Area

$1.$ Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.

E$.$F$.$ Lynch Company

Divisional Income Statements

For the Year Ended June $30,20$Y$8$

Line Item Description Mutual

Fund

Division Electronic

Brokerage

Division Investment

Banking

Division

Fee revenue $Fee revenue

$Fee revenue

$Fee revenue

Operating expenses Operating expenses

Operating expenses

Operating expenses

Operating income $Operating income

$Operating income

$Operating income

Question Content Area

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

Division Profit Margin Investment Turnover ROI

Mutual Fund Division fill in the blank $1$ of $9$

$\%$ fill in the blank $2$ of $9$

fill in the blank $3$ of $9$

$\%$

Electronic Brokerage Division fill in the blank $4$ of $9$

$\%$ fill in the blank $5$ of $9$

fill in the blank $6$ of $9$

$\%$

Investment Banking Division fill in the blank $7$ of $9$

$\%$ fill in the blank $8$ of $9$

fill in the blank $9$ of $9$

$\%$

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

Division first.Divisional income statements and return on investment analysis

The management of E$.$F$.$ Lynch Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.

E$.$F$.$ Lynch Company

Divisional Income Statements

For the Year Ended June $30,20Y8$

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

When faced with limited funds for expansion, management should consider an expansion of the

: Division first.