The vice president of operations of Recycling Industries is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows:

Category	Business Division	Consumer Division
Sales	$42,750,000	$55,000,000
Cost of goods sold	23,000,000	31,000,000
Operating expenses	11,200,000	14,500,000
Invested assets	35,250,000	67,000,000

Problem 2 Instructions

1. Prepare condensed divisional income statements for the year ended December 31, 2020, assuming that there were no service department charges.
2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each division. (Round percentages to one decimal place and the investment turnover to two decimal places.)
3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.
4. Discuss the evaluation of the two divisions compared to each other, using the performance measures determined in parts (a), (b), and (c).