• The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows

Sales $924,000

Cost of goods sold 415,800

Gross profit $508,200

Administrative expenses 184,800

income from operations $323,400

The manager of the Consumer Products Division is considering ways to increase the return on investment.

a.Using theDuPont formulafor return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $2,310,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place.

Profit margin___-%

Investment turnover

Rate of return on investment___%

b.If expenses could be reduced by $46,200 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place.

Profit margin___%

Investment turnover

Rate of return on investment___%

• The income from operations and the amount of invested assets in each division of Beck Industries are as follows:

Income from Operations Invested Assets

Retail Division $126,000 $700,000

Commercial Division 68,000 340,000

Internet Division 158,700 690,000

Assume that management has established a 8% minimum acceptable return for invested assets.

a.Determine the residual income for each division.

Retail Division Commercial Division Internet Division

Income from operations $126,000 $68,000 $158,700

Minimum acceptable income from operations as a percent of invested assets

Residual income

b.Which division has the most residual income?