Divisional Income Statements and Rate of Return on Investment Analysis Sunshine

Question

Divisional Income Statements and Rate of Return on Investment Analysis Sunshine Food Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 2016, are as follows: Retail Bakeries Division Cereal Snack Cake Division Division $3,220,000 1,960,000 551,600 4,600,000 $3,000,000 1,770,000 390,000 2,500,000 Sales Cost of goods sold Operating expenses Invested assets 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 service department charges $3,510,000 2,180,000 628,000 3,900,000 Sunshine Food Company Divisional Income Statements For the Year Ended June 30, 2016 Cereal Division Snack Cake Division Retail Bakeries Division Sales Cost of goods sold Gross Profit

Explanation / Answer

1) Income statement :

2) Calculate following :

3) When faced with limited funds for expansion, management should consider an expansion of the Retail bakeries division first.

Cereal division Snack cake division Retail bakeries division Sales 3220000 3510000 3000000 Cost of goods sold -1960000 -2180000 -1770000 Gross profit 1260000 1330000 1230000 Operating expense -551600 -628000 -390000 Income from operations 708400 702000 840000

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