Explain PR 24-4A Effect of proposals on divisional performance OBJ. 4 A condensed income statement for the Commercial Division of Maxell Manufacturing Inc. for the year ended December 31 is as follows: Sales Cost of goods sold Gross proft Operating expenses Income from operations Invested assets $3,500,000 2,480,000 $1,020,000 600,000 $ 420,000 $2,500,000 Chapter 24 Decentralized Operations 1209 Assume that the Commercial Division received no charges from The president of Maxell Manufacturing has indicated tha $2,500,000 in if operations proposal:s service t the division's return ona vestment must be increased to at least 21% by the end of the next year are to continue. The division manager is considering the following three Proposal 1: T no gain or l the amount of depreciation expense on in expense would be included as unchanged. ransfer equipment with a book value of $312,500 to other divisions oss and lease similar equipment. The annual lease payments would exceed the old equipment by $105,000. This increase part of the cost of goods sold. Sales would remain osal 2: Purchase new and more efficient machining equipment and thereby reduce the cost of goods sold by $560,000 after considering the effects of depreci- ation expense on the new equipment. Sales would remain unchanged, and the old equipment, which has no remaining book value, would be scrapped at no gain oss. The new equipment would increase invested assets by an additional $1,875,000 for the year Proposal 3: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $595,000, reduce cost of goods sold by $406,700, and reduce operat- ing expenses by $175,000. Assets of $1,338,000 would be transferred to other divisions at no gain or loss. Instructions 1. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for the Commercial Division for the 2. Prepare condensed estimated income statements and compute the invested assets 3. Using the DuPont formula for return on investment, determine the profit margin 4, which of the three proposals would meet the required 21% return on investment? past year each proposal investment turnover, and return on investment for each proposal. Round percentages and the investment turnover to one decimal place 5. If the Commercial Division were in an industry where the profit margin could n be increased, how much would the investment turnover have to increase to meet the presid ent's required 21% return on investment? Round to one decimal place