Divisional Income Statements and Return on Investment Analysis The Crunchy Granola 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 $25,000,000 $8,000,000 $9,750,000 Cost of goods sold 16,670,000 5,575,000 6,795,000 Operating expenses 7,330,000 1,945,000 2,272,500 Invested assets 10,000,000 4,000,000 6,500,000 The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations. Required: Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. The Crunchy Granola Company Divisional Income Statements For the Year Ended June 30, 20Y7 Cereal Division Snack Cake Division Retail Bakeries Division Sales $ $ $ Cost of goods sold Gross profit $ $ $ Operating expenses Operating income $ $ $ 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 answers to one decimal place. Division Profit Margin Investment Turnover ROI Cereal Division % % Snack Cake Division % % Retail Bakeries Division % %

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 3PA

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Divisional Income Statements and Return on Investment Analysis

The Crunchy Granola 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	$25,000,000		$8,000,000	$9,750,000
Cost of goods sold	16,670,000		5,575,000	6,795,000
Operating expenses	7,330,000		1,945,000	2,272,500
Invested assets	10,000,000		4,000,000	6,500,000

The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.

The Crunchy Granola Company
Divisional Income Statements
For the Year Ended June 30, 20Y7
	Cereal Division	Snack Cake Division	Retail Bakeries Division
Sales	$	$	$
Cost of goods sold
Gross profit	$	$	$
Operating expenses
Operating income	$	$	$

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 answers to one decimal place.

Division	Profit Margin	Investment Turnover	ROI
Cereal Division	%		%
Snack Cake Division	%		%
Retail Bakeries Division	%		%

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