Question
Segmented Net Income. Valdez Company has two divisionsAppliances and Tools. The following segmented financial information is for the most recent fiscal year ended December 31.
Segmented Net Income. Valdez Company has two divisionsAppliances and Tools. The following segmented financial information is for the most recent fiscal year ended December 31.
Appliances Division Tools Division
Sales $3,000,000 $1,000,000
Cost of goods sold 1,600,000 430,000
Allocated overhead 375,000 125,000
Selling and admin expenses 250,000 200,000
Assume the tax rate is 30 percent.
Required:
a. Using the format presented in Figure 11.3. (https://imgur.com/a/uZixTD8), prepare a segmented Income Statement. Include the profit margin ratio for each division at the bottom of the segmented income statement.
b. Using net income as the measure, which division is most profitable? Explain why this conclusion might be misleading.
c. 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?
Figure 11.3 information for Requirement "a."W
Will not let me post images for some reason. Here is an imgur link to the Figure 11.3:
https://imgur.com/a/uZixTD8
Thanks in advance for the help in understanding
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