Divisional Performance Analysis and Evaluation

The vice president of operations of Morrison IQ Company is evaluating the performance of two divisions organized asinvestment centers. Invested assets and condensed income statement data for the past year for each division are as follows:

Business DivisionConsumer DivisionSales$ 1,560,000$ 1,650,000Cost of goods sold686,000776,000Operating expenses593,200610,000Invested assets1,200,0001,100,000Required:

1.Prepare condensed divisional income statements for the year ended December 31, 2014, assuming that there were noservice department charges.

2. Using theDuPont formulaforrate of return on investment, determine theprofit margin,investment turnover, and rate of return on investment for each division. If required, round your answers to one decimal place

3.If management desires a minimum acceptable rate of return of 17%, determine theresidual incomefor each division. If required, use the minus sign to indicate a negative income.

4.On the basis of residual income, theSelect

Business

Consumer

Division is the more profitable of the two divisions. On the basis of income from operations, theSelect

Business

Consumer

Division is the more profitable of the two divisions.

https://gyazo.com/7d2aa76675687d50db388e9891a5cb4c