- Ch 5 Performance Evaluation Franklin Bikes Has Two Divisions Road Bikes And Mountain Bikes Assume The Road Bikes Div 1 (43.27 KiB) Viewed 21 times
Ch. 5 - Performance Evaluation Franklin Bikes has two divisions-Road Bikes and Mountain Bikes. Assume the Road Bikes division had average operating assets of $4,500,000, and the Mountain Bikes division had average operating assets of $800,000. The company's cost of capital rate is 8 percent. Franklin Bikes Segmented Income Statements for the current Fiscal Year Ended December 31 (dollar amounts are in thousands) Road Bikes Division Mountain Bikes Division Sales Cost of goods sold Gross margin Allocated overhead Selling and administrative expenses Operating income Income tax expense (30% rate) Net income $1,500,000 800,000 $ 700,000 150,000 100,000 $ 450,000 135,000 $ 315,000 $500,000 215,000 $285,000 115,000 75,000 $ 95,000 28,500 $ 66,500 a. Calculate the profit margin ratio before and after taxes, for each division b. Calculate the return on investment (ROI) before and after taxes, for each division. c. Calculate the residual income (RI) for each division. d. Calculate EVA for each division.