Question Divisional Income Statements and Rate of Return on Investment Analysis Sunshine Food 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, 2016, are as follows: The management of Sunshine Food 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 rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division. Round your answers to one decimal place. 3. When faced with limited funds for expansion, management should consider an expansion of the Division first.     Cereal Division   Snack Cake Division Retail Bakeries Division Sales $5,060,000   $5,400,000   $4,740,000   Cost of goods sold 3,090,000   3,350,000   2,800,000   Operating expenses 958,000   1,078,000   612,800   Invested assets 4,600,000   6,000,000   7,900,000

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
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Divisional Income Statements and Rate of Return on Investment Analysis

Sunshine Food 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, 2016, are as follows:

The management of Sunshine Food 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 rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division. Round your answers to one decimal place.

3. When faced with limited funds for expansion, management should consider an expansion of the Division first.

 

 

Cereal

Division

 

Snack Cake

Division

Retail

Bakeries

Division

Sales

$5,060,000

 

$5,400,000

 

$4,740,000

 

Cost of goods sold

3,090,000

 

3,350,000

 

2,800,000

 

Operating expenses

958,000

 

1,078,000

 

612,800

 

Invested assets

4,600,000

 

6,000,000

 

7,900,000

 

             

 

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