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PR 9-4B Effect of proposals on divisional performance Obj. 4 A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the
PR 9-4B Effect of proposals on divisional performance Obj. 4 A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31, 20Y9, is as follows: Sales Cost of goods sold Gross profit Operating expenses Income from operations Invested assets $1,575,000 891,000 $ 684,000 558,000 $ 126,000 $1,050,000 EXCEL TEMPLATE Assume that the Electronics Division received no charges from service departments. The president of Gihbli Industries Inc. has indicated that the division's return on a $1,050,000 investment must be increased to at least 20% by the end of the next year if operations are to continue. The division manager is considering the following three proposals: Proposal 1: Transfer equipment with a book value of $300,000 to other divisions at no gain or loss and lease similar equipment. The annual lease payments would be less than the amount of depreciation expense on the old equipment by $31,400. This decrease in expense would be included as part of the cost of goods sold. Sales would remain unchanged.
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