The Snack Foods Division of Diversified Foods Inc. has been experiencing revenue and profit growth during the

Question:

The Snack Foods Division of Diversified Foods Inc. has been experiencing revenue and profit growth during the years 2005€“2007. The divisional income statements are provided below.

Assume that there are no charges from service departments. The vice-president of the division, Kevin Duncan, is proud of his division€™s performance over the last three years. The president of Diversified Foods Inc., LaToya Crawford, is discussing the division€™s performance with Kevin, as follows:
Kevin: As you can see, we€™ve had a successful three years in the Snack Foods Division. LaToya: I€™m not too sure.
Kevin: What do you mean? Look at our results. Our income from operations has nearly tripled, while our profit margins are improving.
LaToya: I am looking at your results. However, your income statements fail to include one very important piece of information; namely, the invested assets.
You have been investing a great deal of assets into the division. You had $210,000 in invested assets in 2005, $540,000 in 2006, and $1,300,000 in 2007.
Kevin: You are right. I€™ve needed the assets in order to upgrade our technologies and expand our operations. The additional assets are one reason we have been able to grow and improve our profit margins. I don€™t see that this is a problem.
LaToya: The problem is that we must maintain a 20% rate of return on invested assets.
1. Determine the profit margins for the Snack Foods Division for 2005€“2007.
2. Calculate the investment turnover for the Snack Foods Division for 2005€“2007.
3. Calculate the rate of return on investment for the Snack Foods Division for 2005€“2007.
4. Evaluate the division€™s performance over the 2005€“2007 time period. Why was LaToya concerned about theperformance?