Acc202 Survey of Accounting: P14-3 Sunshine Baking Company is a diversified food products company

Acc202 Survey of Accounting

P14-3
Sunshine 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, 2010, are as follows:
Bread Division Snack Cake Division Retail Bakeries
Division Sales 8,100,0008,700,0007,800,000
Cost of Goods Sold 4,980,0005,400,0004,600,000
Operating expenses 1,662,0001,995,0001,484,000
Invested assets 10,800,00010,875,0006,000,000
The management of Sunshine 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.
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