Answer:
Recycling Inductries
1. Condensed Divisional Income Statement for the year ended Dec 31 20Y8
Business Division Consumer Division
$ $
sales 42,800,000 56,000,000
Cost of Goods Sold <u> (23,500,000) </u> <u> (30,500,000)</u>
Gross Profit 19,300,000 25,500,000
Operating expenses <u> (11,424,800)</u> <u> (14,300,000)</u>
Net Income <u> 7,875,200</u> <u> 11,200,000</u>
2. Using Duo point Analysis
Profit Margin = Net Income / sales
<u>7,875,000 * 100%</u> <u>11,200,000 * 100%</u>
42,800,000 56,000,000
= 18.4% 20.0%
Investment Turnover = Sales / Invested asset
<u>42,800,000 </u> <u>56,000,000</u>
34,240,000 70,000,000
= 1.25 0.8
Return on Investment using Duo-point = Profit margin* Investment turnover
Business dividion = 18.4% *1.25 = 23%
Consumer division = 20% * 0.8 = 16%
3. Residual Income
Business dividion Consumer division
Net income $7,875,200 $11,200,000
Imputed cost* <u> (3,424,000) </u> <u> (7,000,000)</u>
Residual Income <u> 4,451,200 </u> <u> 4,200,000</u>
4. Evaluation of performance of eaxh division
In term of profit, consumer division perform better than business division but in term of return on investment, business dividion has better performance. in term of residual income, business dividion is better in tem of performance than the consumer division.
Explanation:
