Practice Problem 14.1 Health Quest operates fitness centers and organizes its operations into three geographical areas: Western, Midwestern, and Eastern Divisions. The following shows Health Quest's divisional income statements from last year. Sales Cost of sales Gross margin Operating expenses Allocated corporate overhead Operating income Income tax (30% After-tax income Western Division $2,800,000 1.497.000 1,303,000 503.000 228,571 571,429 171.429 $ 400.000 Midwestern Eastern Division Division Total $2,226,000 $3,391,060 $8,417,060 1,201,000 1,648,059 4,346,059 1,025,000 1.743,001 4,071,001 385.000 663,000 1,551,000 182.857 308,572 720,000 457.143 771,429 1,800,001 137,143 231,429 540,001 $ 320,000 $ 540,000 $1.260.000 Required: Calculate the gross margin ratio, the operating margin ratio, and the profit margin ratio for the three divisions of Health Quest. Practice Problem 14.3 (Continued from Demonstration Problems 1 and 2) Required: Calculate the residual income for the three divisions of Health Quest, assuming a 12% cost of capital