Divisional performance analysis and evaluation

Required:

Prepare condensed divisional income statements for the year ended December $31,20Y7,$ assuming that there were no support department allocations.

Free Ride Bike Company

Divisional Income Statements

For the Year Ended December $31,20Y7$

If management's minimum acceptable return on investment is $10\%,$ determine the residual income for each division.

Residual Income

Road Bike Division

Mountain Bike Division

On the basis of operating income, the

Division is the more profitable of the two divisions. However, operating income