Divisional income statements and return on investment analysis

The Crunchy Granola 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, 20Y7, are as follows:

Line Item Description	Cereal Division	Snack Cake Division	Retail Bakeries Division
Sales	$25,000,000	$8,000,000	$9,750,000
Cost of goods sold	16,670,000	5,575,000	6,795,000
Operating expenses	7,330,000	1,945,000	2,272,500
Invested assets	10,000,000	4,000,000	6,500,000

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

Required:

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

Line Item Description	Cereal Division	Snack Cake Division	Retail Bakeries Division
Sales	$Sales	$Sales	$Sales
Cost of goods sold	Cost of goods sold	Cost of goods sold	Cost of goods sold
Gross profit	$Gross profit	$Gross profit	$Gross profit
Operating expenses	Operating expenses	Operating expenses	Operating expenses
Operating income	$Operating income	$Operating income	$Operating income

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

Division	Profit Margin	Investment Turnover	ROI
Cereal Division	fill in the blank 1 of 9 %	fill in the blank 2 of 9	fill in the blank 3 of 9 %
Snack Cake Division	fill in the blank 4 of 9 %	fill in the blank 5 of 9	fill in the blank 6 of 9 %
Retail Bakeries 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

CerealRetail BakeriesSnack Cake

Division first.