Car Deals Inc.has two divisions: New Cars and Used Cars.The following segmented financial information is for the most recent fiscal year:

The New Cars division had average operating assets totaling $17,400,000 for the year,and the Used Cars division had average operating assets of $22,800,000.Assume the cost of capital rate is 15 percent,and the company's tax rate is 40 percent.
a.Prepare a segmented income statement,including the profit margin ratio for each division at the bottom of the segmented income statement.
b.Calculate return on investment (ROI)for each division.
c.Calculate residual income for each division.
c.What does this information tell you about each division?
d.Summarize the answers to parts a,b,and

Question

Car Deals Inc.has two divisions: New Cars and Used Cars.The following segmented financial information is for the most recent fiscal year:
  
The New Cars division had average operating assets totaling $17,400,000 for the year,and the Used Cars division had average operating assets of $22,800,000.Assume the cost of capital rate is 15 percent,and the company's tax rate is 40 percent. 
a.Prepare a segmented income statement,including the profit margin ratio for each division at the bottom of the segmented income statement.
b.Calculate return on investment (ROI)for each division.
c.Calculate residual income for each division.
c.What does this information tell you about each division?
d.Summarize the answers to parts a,b,and

Quizplus · Accepted Answer

The Answer of Car Deals Inc.has two divisions: New Cars and Used Cars.The following segmented financial information is for the most recent fiscal year:
  
The New Cars division had average operating assets totaling $17,400,000 for the year,and the Used Cars division had average operating assets of $22,800,000.Assume the cost of capital rate is 15 percent,and the company's tax rate is 40 percent. 
a.Prepare a segmented income statement,including the profit margin ratio for each division at the bottom of the segmented income statement.
b.Calculate return on investment (ROI)for each division.
c.Calculate residual income for each division.
c.What does this information tell you about each division?
d.Summarize the answers to parts a,b,and