The Whole Life Baked Goods Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y7, are as follows:

	Cereal Division	Snack Cake Division	Retail Bakeries Division
Sales	$17,600,000	$18,000,000	$9,520,000
Cost of goods sold	10,600,000	12,550,000	6,630,000
Operating expenses	6,120,000	4,730,000	2,318,800
Invested assets	8,000,000	6,000,000	6,800,000

The management of The Whole Life Baked Goods 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 no service department charges.
2.	Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. If required, round your final answer 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?

X

Divisional Income Statements

1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.

The Whole Life Baked Goods Company

Divisional Income Statements

For the Year Ended June 30, 20Y7

1		Cereal Division	Snack Cake Division	Retail Bakeries Division
2	Sales
3	Cost of goods sold
4	Gross profit
5	Operating expenses
6	Income from operations

X

Final Questions

2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. If required, round your final answer to one decimal place.

Division	Profit Margin	Investment Turnover	ROI
Cereal
Snack Cake
Retail Bakeries

3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion?

Snack Cake

Cereal

Retail Bakery