Question

The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Road Bike Division Mountain Bike Division Sales $1,728,000 $1,760,000 Cost of goods sold 1,380,000 1,400,000 Operating expenses 175,200 236,800 Invested assets 1,440,000 800,000 Required: 1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations.

Answer 1

Answer:

Road Bike Division Mountain Bike Division

Net Income $172,800 $123,200

Explanation:

Preparation condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations.

Road Bike Division Mountain Bike Division

Sales $1,728,000 $1,760,000

Less Cost of goods sold 1,380,000 1,400,000

Gross profit $348,000 $360,000

Less Operating expenses 175,200 236,800

Net Income $172,800 $123,200

Therefore condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations will be:

Road Bike Division Mountain Bike Division

Net Income $172,800 $123,200