Line Item Description
Sales
Cost of goods sold
Gross profit
Operating expenses
Operating income(loss)
Weeping Division Corkscrew Division
$4,920,000 $ 5,180,000
2,165,000 2,435,000
$2.755.000$ 2.745,000
1,869,400
$ 885,600
2,019,800
725,200
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1. For each division, subtract operating expenses from gross profit.
2. Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. Round all answers one decimal place.
Weeping Division
Profit Margin
18 %
14
%
Investment Turnover
1.2
1.4
ROI
21.6
19.6%
Corkscrew Division
3. If management desires a minimum acceptable rate of return of 16%, determine the residual income for each division. Use the minus sign to indicate a negative income.
Residual Income
Weeping Division:
Corkscrew Division:
4. The Weeping Division has $$ more residual income than the Corkscrew Division.