This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: 1. RUCKER-PUTNAM BIKE COMPANY Divisional Income Statements For the Year Ended December 31, 2010 Sales $2,800,000 $2,950,000 Cost of goods sold 1,240,000 1,375,000 Gross profit $1,560,000 $1,575,000 Operating expenses 1,168,000 1,073,500 Income from operations $392,000 $501,500 2. Rate of return on = Profit margin x Investment turnover investment (ROI) Rate of return on = Income from Operations x Sales investment (ROI) Sales Invested Assets Touring Bike Division: ROI = $392,000 x $2,800,000 = 24.5% $2,800,000 $1,600,000 Off-Road Bike Division: ROI = $501,500 x $2,950,000 = 17.0% $2,950,000 $2,950,000 3. Touring Bike Division residual income: $104,000 Off-Road Bike Division residual income: ($29,500) 4. Instructions Touring Bike Division Off-Road Bike Division Because of differences in asset turnover ratios, the two divisions should be evaluated on the basis of residual income rather than ROI....
View Full Document
This note was uploaded on 11/04/2011 for the course ACC 121 taught by Professor Thomas during the Winter '08 term at Baker MI.
- Winter '08