The vice president of operations of recycling industries 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 $2,500,000
cost of goods sold 1,260,000 1,325,000
operating expenses 765,000 850,000
invested assets 865,385 2,500,000
required:
1. prepare condensed divisional income statements for the year ended december 31, 20y8, 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 answers to two decimal places.
3. if management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.
4. discuss the evaluation of the two divisions, using the performance measures previously determined in parts (1), (2), and (3).