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 Mountain Bike Division Division Sales Cost of goods sold Operating expenses Invested assets Required: Line Item Description Sales 1. 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 Cost of goods sold Gross profit $2,750,000 1,210,000 1,045,000 2,500,000 Operating expenses Operating income $2,940,000 1,382,000 1,087,600 2,100,000 Road Bike Mountain Bike Division Division

Divisional performance analysis and evaluation The vice president of operations of Free Rude Bke Company is evaluating the performance of two divisions organized as investment centers. Invested astets and condensed income statement data for the past year for each division are as follows: 1. 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, 20V 7 Divisional Income Statements For the Year Ended December 31, 20Y7 2. Using the Dupont formula for return on investment, determine the profit margin, investment turnover, and 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 12%, determine the residual income for each division. 4. On the basis of operating income, the Division is the more proftable of the two divisions. However, operating income 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