Instructions The vice president of operations of Recycling Industries is evaluating the performance of two divisions organized as westment centers invested assets and condensed income statement data for the past year for each division are as follows: Sales Cost of goods sold Operating expenses Invested assets Business Division 52.250.000 1.320,000 582500 97,261 Consumer Division 52.550.000 1,330,000 388,500 2.833,333 Required: 1. Prepare condensed divisional income statements for the year anded December 31, 20 YB, assuming that there were no service department charges 2. Using the DuPont formula for retum on investment determine the profit margin, investment move and return on investment for each division. It required round your answers to one decimal piece 3. If management desires a minimum acceptable return on investment of 17.00%, determine the residual income for each division. Use the minus sign to indicate a negative income Round your answers to the nearest dollar 4. Discuss the evaluation of the two divisions, using the performance measures previously determined in parts (1), (2) and (3) 1. Prepare condensed divisional income statements for the year ended December 31, 2018, assuming that there were no service department charges Recycling Industries Divisional Income Statements For the Year Ended December 31, 2048 Business Division 1 Consumer Division 2 Sales * Cost of goods sold 4 Gross profit 5. Operating expenses Income from operations 2. Using the DuPont kormula dor meturn on investment, determine the profit margin investment fummovet and return on investment for each division. If required, sound your answers to ono decimal place Profit Margin Investment Turnover Business Division % Consumer Division ROI a 3. management desires a minimum acceptable return on investment or 17.00% dermine the residual income for each division. Une minus sign to indicate a negative Income Hound your answers to the newest dollar, Residual income Business Divisions Consumer Divisions 4 Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2) and (3) 4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3) On the basis of income from operations, the Division is more profitable. However, income from operations does not consider the amount of invested assets in onch division on the basis of the rate of return on investment, the Division is more profitable. Even though the Division has a higher proft margin, the Division has a higher investment turnover, which generates the higher rate of return on investment. On the basis of residual income, the Division is the more profitable of the two division
