Question

Sunshine Food Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets available to the center.investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 2016, are as follows:

The management of Sunshine Food Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

1. Prepare condensed divisional income statements for the three divisions, assuming that there were no The costs of services provided by an internal service department and transferred to a responsibility center.service department charges.

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2. Using the An expanded expression of return on investment determined by multiplying the profit margin by the investment turnover.DuPont formula for A measure of managerial efficiency in the use of investments in assets, computed as income from operations divided by invested assets.rate of return on investment, compute the A component of the rate of return on investment, computed as the ratio of income from operations to sales.profit margin, A component of the rate of return on investment, computed as the ratio of sales to invested assets.investment turnover, and rate of return on investment for each division. Round your answers to one decimal place.

3. When faced with limited funds for expansion, management should consider an expansion of the

Cereal

Snack Cake

Retail Bakeries

Division first.

 

 

Cereal

Division

 

Snack Cake

Division

Retail

Bakeries

Division

Sales

$2,240,000

 

$2,340,000

 

$2,160,000

 

Cost of goods sold

1,370,000

 

1,450,000

 

1,270,000

 

Operating expenses

377,200

 

328,400

 

544,400

 

Invested assets

3,200,000

 

2,600,000

 

1,800,000

 

             

 



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