nal performance analysis and evaluation The vice president of operations of Pavo
ID: 2466633 • Letter: N
Question
nal performance analysis and evaluation
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:
Business Division
Consumer Division
1. Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were no service department charges.
Question not attempted.
Score: 0/40
PAVONE COMPANY
Divisional Income Statements
For the Year Ended December 31, 2016
1
Business Division
Consumer Division
2
Sales
3
Cost of goods sold
4
Gross profit
5
Operating expenses
6
Income from operations
Points:
0 / 10
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1. For each division, subtract operating expenses from gross profit.
2. 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.
Profit Margin
Investment Turnover
ROI
Points:
0 / 6
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2. Income from operations divided by sales equals profit margin. Sales divided by invested assets equals investment turnover. Multiply these two percentages for the rate of return.
3. If management desires a minimum acceptable rate of return of 17.00%, determine the residual income for each division. Use the minus sign to indicate a negative income.
Residual Income
Points:
0 / 2
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Business Division
Consumer Division
Sales $2,160,000 $2,520,000 Cost of goods sold 1,270,000 1,330,000 Operating expenses 630,800 887,600 Invested assets 744,828 2,100,000Explanation / Answer
Answer:1
Answer:2
Answer:3
PAVONE COMPANY Divisional Income Statements For the Year Ended December 31, 2016 1 Business Division Consumer Division 2 Sales 2160000 2520000 3 Cost of goods sold 1270000 1330000 4 Gross profit 890000 1190000 5 Operating expenses 630800 887600 6 Income from operations 259200 302400Related Questions
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