Divisional performance analysis and evaluation Instructions Divisional Income Statements Final Questions Instructions The vice president of operations of Pavone Company is evaluating the performance of two divisions organized as investment centers invested for the past year for each division are follows and condensed income statement data Consumer Division Sales Cost of goods sold Business Division $2.070,000 1.250.000 613,000 62,500 $2,400.000 30 000 811.400 2,705.667 Operating expenses Invested assets Required: 1. Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were Service derment charges 2. Using the DuPont formula for at of return on investment determine the profit investment and refretum on investment for each on rgved round your final answer to one decual place 3 management desires a n acc o um of 19.00 h o me for each Use them to indicate a negative income 4. Discuss the evaluation of the two divisions, using the performance measures previous determined Divisional Income Statements 1. Prepare condensed divisional income statements for the year anded December 31, 2016, assuming that there were no service department charges PAVONE COMPANY Divisional Income Statements For the Year Ended December 31, 2016 Consumer Business Division Division 1 Sales Cost of goods sold Gross profit Operating expenses 6 Income from operations Final Questions required, round your final 2. Using the DuPont formula for rate of return on investment determine the profit margin, investment turnover and rate of return on investment for each division answer to one decimal place Profit Margin Investment Turnover Business Division Consumer Division income for each division. Use the minus sign to indicate a negative income 3. Ir management desires a minimum acceptable rate of return of 19.00%, determine the real Residual income Business Division Consumer Division $ 4. Discuss the evaluation of the two divisions, using the performance measures previously determined On the basis of income from operations, the Division is more profitable. However income from operations does not consider the amount of invested assets in each division. On the basis of the rate of return on investment, the Division is more profitable. Even though the Division has a higher profit margin, the Division has a higher investment turnover, which generates the higher rate of return on investment. On the basis of residual income, the Division is the more profitable of the two divisions