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:

Required:

1. Using the DuPont formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment for each division. If required, round your final answer to one decimal place.

2. If management desires a minimum acceptable rate of return of 19.00%, determine the residual income for each division. Use the minus sign to indicate a negative income.

3. Discuss the evaluation of the two divisions, using the performance measures previously determined.

Transcribed Image Text:

Sales Cost of goods sold Operating expenses Invested assets Business Division $2,100,000 1,250,000 598,000 750,000 Consumer Division $2,480,000 1,330,000 852,400 2,066,667 Sales Cost of goods sold Operating expenses Invested assets Business Division $2,100,000 1,250,000 598,000 750,000 Consumer Division $2,480,000 1,330,000 852,400 2,066,667

Answer rating: 100% (QA)

1 Business Division Profit Margin Net Operating Income Sales Profit Margin 252000 2100000 Profit Mar... View the full answer