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The vice president of operations of Pavone Company is evaluating the performance of two divisions organized...

The vice president of operations of Pavone Company 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:

Business Division

Consumer Division
Sales $2,250,000 $2,550,000
Cost of goods sold 1,320,000 1,330,000
Operating expenses 705,000 914,000
Invested assets 978,261 2,833,333
Required:
1. Prepare condensed divisional income statements for the year ended December 31, assuming that there were no service department charges.
2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each division. If required, round your final answers to one decimal place.
3. If management wants a minimum acceptable return of 17.00%, determine the residual income for each division. Use the minus sign to indicate a negative income. Round final answers to nearest whole dollar.
4. Discuss the evaluation of the two divisions, using the performance measures previously determined.

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ekkarill92 answered 2 years ago
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