Question
The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized asinvestment centers. Condensed
The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized asinvestment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y7, are as follows:
Cereal DivisionSnack Cake DivisionRetail Bakeries DivisionSales$25,000,000 $8,120,000 $9,750,000
Cost of goods sold 16,620,000 5,555,000 6,720,000
Operatingexpenses 7,130,000 1,915,400 2,542,500
Invested assets 7,142,857 2,030,000 3,250,000
The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations.
Required:1.Prepare condensed divisional income statements for the three divisions, assuming that there were noservice department charges.2.Using theDuPont formulaforreturn on investment, compute theprofit margin,investment turnover, and return on investment for each division. If required, round your final answers to one decimal place.3.If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)?
2. Using theDuPont formulaforreturn on investment, compute theprofit margin,investment turnover, and return on investment for each division. If required, round your final answers to one decimal place.
DivisionProfit MarginInvestment TurnoverROI
Cereal % %
Snack Cake % %
RetailBakeries % %
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