The vice president of operations of Cantor-Simmons Cycle Company is evaluating the performance of two divisions organized as investment centers. Invested asset

Instructions
1. Prepare condensed divisional income statements for the year ended December 31, 2008, assuming that there were no service department charges.
2. Using the DuPont formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment for each division.
3. If management desires a minimum acceptable rate of return of 18%, determine the residual income for each division.
4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and(3).

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Road Bike Division Mountain Bike Division Sales Cost of goods sold Operating expenses Invested assets $750,000 412,500 187,500 600,000 950,000 560,000 181,000 1,187,500