Survey of Accounting (Accounting I)
Solutions
Survey of Accounting (Accounting I)
Divisional income statements and return on investment analysis
High Country Foods Inc. is a diversified food products company with 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
The management of High Country Foods Inc. is evaluating each division as a basis for planning a future expansion of operations.
Instructions
Using the DuPonl formula, compute the profit margin, investment turnover, and return on investment for each division.
Concept Introduction:
DuPont analysis is an Analysis to examine the Return of Equity (ROE) of a company by various means which includes Profit margin, Asset turnover and financial leverage.
To Calculate:
- Profit margin
- Investment turnover
- Return on investment
Statement showing calculation of Profit Margin, Investment Turnover and Return on Investment
| Particular | Breakfast Division | Bakery Division | Frozen foods Division |
| Net Income | $ 2,376,000 | $ 1,295,000 | $ 1,920,000 |
| Revenue | $ 39,600,000 | $ 18,500,000 | $ 24,000,000 |
| Profit margin = Net Income/ Revenue | 6% | 7% | 8% |
| Revenue | $ 39,600,000 | $ 18,500,000 | $ 24,000,000 |
| Total assets | $ 22,000,000 | $ 9,250,000 | $ 16,000,000 |
| Assets turnover = Revenue/ Total assets | 1.8 | 2 | 1.5 |
| Return on Investment = Profit margin*Assets Turnover | 6% * 1... |
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