The vice president of operations of Six Layer Computers Inc. 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:

Instructions1. Prepare condensed divisional income statements for the year ended December 31, 2010, 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's minimum acceptable rate of return is 14%, 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).

Transcribed Image Text:

Network Equipment Division Personal Computing Division $1,1 20,000 690,000 206,000 1,400,000 S1,400,000 845,000 345,000 1,000,000 Sales Cost of goods sold Operating expenses Invested assets