Solution-Prepare condensed divisional income statements

Prepare condensed divisional income statements

Reference no: EM13977491

Fresh Tracks Baking Company is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 2008, are as follows:

			Retail
	Bread	Snack Cake	Bakeries
	Division	Division	Division
Sales	$1,450,000	$1,750,000	$1,000,000
Cost of goods sold	950,000	1,125,000	650,000
Operating expenses	268,000	380,000	170,000
Invested assets	1,812,500	2,187,500	800,000

The management of Fresh Tracks Baking Company is evaluating each division as a basis for planning a future expansion of operations.

Instructions

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.

3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)? Explain.

Reference no: EM13977491

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Prepare condensed divisional income statements

Reference no: EM13977491

Reference no: EM13977491

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