Financials	Northwest Division	South Division	East Division
Sales	$22,000,000	$8,000,000	$18,000,000
Cost of goods sold	$10,000,000	$2,000,000	$7,000,000
Allocated overhead	$4,125,000	$1,500,000	$3,375,000
Selling and administrative expenses	$5,000,000	$3,200,000	$5,000,000

Assume the tax rate is 35 percent.

Complete the following for this assignment:

Prepare a segmented income statement using the format presented in Table 11.1. Include the profit margin ratio for each division at the bottom of the segmented income statement.

Using net income as the measure, which division is most profitable? Explain why this conclusion might be misleading.

What does the profit margin ratio tell us about each division? Why do organizations often use profit margin ratio to evaluate division performance rather than simply using net income?

4. Segmented Net Income a. Segmented income statements are shown below