1. Divisional Income Statements and Return on Investment Analysis

   Horizon Foods Inc. is a diversified food products 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, 20Y7, are as follows:

   	Breakfast Division		Lunch Division		Dinner Division
   Sales	$19,800,000		$9,250,000		$12,000,000
   Cost of goods sold	16,250,000		6,750,000		7,200,000
   Operating expenses	2,362,000		1,852,500		3,840,000
   Invested assets	11,000,000		4,625,000		8,000,000

   The management of Horizon Foods Inc. 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 service department charges.

   Horizon Foods Inc. Divisional Income Statements For the Year Ended June 30, 20Y7

   	Breakfast Division	Lunch Division	Dinner Division
   Net profitOffice expensesSales expensesSales	$- Select -	$- Select -	$- Select -
   Cost of goods soldNet profitOperating expensesSales expenses	- Select -	- Select -	- Select -
   Administrative expensesCashGross profitNet profit	$- Select -	$- Select -	$- Select -
   CashNet profitOperating expensesSales expenses	- Select -	- Select -	- Select -
   Operating income	$fill in the blank 6ca7a3ff5040fe1_17	$fill in the blank 6ca7a3ff5040fe1_18	$fill in the blank 6ca7a3ff5040fe1_19

   Question Content Area

   2. Using the DuPont formula, compute the profit margin, investment turnover, and return on investment for each division.

   Round to one decimal place.

   	Profit Margin	Investment Turnover	ROI
   Breakfast Division	fill in the blank a0ea0408d05b048_1 %	fill in the blank a0ea0408d05b048_2	fill in the blank a0ea0408d05b048_3 %
   Lunch Division	fill in the blank a0ea0408d05b048_4 %	fill in the blank a0ea0408d05b048_5	fill in the blank a0ea0408d05b048_6 %
   Dinner Division	fill in the blank a0ea0408d05b048_7%	fill in the blank a0ea0408d05b048_8%	fill in the blank a0ea0408d05b048_9%

   Question Content Area

   3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)? Complete the paragraph below.

   Per dollar of invested assets, the

   BreakfastLunchDinner

   is the most profitable of the three divisions. Assuming that the returns on investment do not change in the future, an expansion of this division will return fill in the blank 734bacfd4fc1062_2 cents on each dollar of invested assets. Thus, when faced with limited funds for expansion, management should consider the division identified above.

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