The vice president of operations of avigi iq 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,$1,800,000.$1,850,000
- costs of good sold.940,000.950,000.
- operating expenses.572,000.493,000
- invested assets.1,200,000.2,312,500
1.) prepare condensed divisional income statements for the year ended december 31,2012, assuming that there were no service dept charges
2.) using the dupont formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return for each division.
3.) if management desires a minimum acceptable rate of return of 18%, determine the residual income for each division.
4.) discuss the evaluation of both of the divisions, using the performance measures determined in parts 1,2,and 3