Divisional Performance Analysis and Evaluation The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers Invested assets and condensed income statement data for the past year for each division are as follows: Road Bike Division $ 5,640,000 Sales Cost of goods sold Operating expenses Invested assets 2,482,000 2,199,200 4,700,000 Mountain Bike Division $6,000,000 2,820,000 2,040,000 4,000,000 Required: 1. Prepare condensed divisional income statements for the year ended December 31, 2017, assuming that there were no service department charges. Free Ride Bike Company Divisional Income Statements For the Year Ended December 31, 2017 Road Bike Division Mountain Bike Division Sales Cost of goods sold Gross profit Operating expenses Income from operations Sales Cost of goods sold Gross profit Operating expenses Income from operations 2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and rate of return on investment for each division. If required, round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Road Bike Division Mountain Bike Division 3. If management desires a minimum acceptable rate of return of 12%, determine the residual income for each division. If required, use the minus sign to indicate a negative income. Residual Income Road Bike Division Mountain Bike Division 4. On the basis of income from operations, the Division is the more profitable of the two divisions. However, income from operations consider the amount of invested assets in each division. On the basis of residual income, the Division is the more profitable of the two divisions. Uperating expenses Income from operations 2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and rate of return on investment for division. If required, round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Road Bike Division % Mountain Bike Division 3. If management desires a minimum acceptable rate of return of 12%, determine the residual income for each division. If required, use the minu sign to indicate a negative income. Residual Income Road Bike Road Bike Division Mountain Bike Mountain Bike Division 4. On the basis of income from operations, the Division is the more profitable of the two divisions. However, income from operations consider the amount of investe "dropdown each division. On the basis of residual income, the Division is the more profitable of the two divisions. R uPont formula for return on investment, determine the profit margin, investment turnovel division. If required, round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Road Bike Division % Mountain Bike Division 3. If management desires a minimum acceptable rate of return of 12%, determine the residual income for sign to indicate a negative income. Residual Income Road Bike Divisi does Mountain Bike does not 4. On the basis From operations, the Division is the more profitable of the to operations They consider the amount of invested assets in each division. On the basis of re Division is the more profitabre of the two divisions
