Scranton Company has three operating segments. The managers of each segment have decision-making authority regarding pricing, cost control and asset investment. The following information is available for the three segments for the third quarter of 2014:
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|
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Alpha
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Beta
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Delta
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Revenues
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$790,000
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$1,245,000
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$990,000
|
|
Operating Expenses
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$560,000
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$960,000
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$700,000
|
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Invested Assets
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$1,600,000
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$2,000,000
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$2,080,000
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Number of Transactions
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120,000
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150,000
|
130,000
|
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Desired Minimum ROI
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12.0%
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12.0%
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12.0%
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The company has a centralized accounting system. For financial reporting purposes, accounting department costs and common corporate costs are allocated to the segments as follows:
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Accounting Department (number of transactions)
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$60,000
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Corporate Headquarters' Costs (per revenue dollar)
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$810,000
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REQUIRED:
Part 1: Prepare a report showing the operating incomes of the three segments for performance evaluate purposes
Part 2: Identify the most successful segment according to each of the following measurements: (Show supporting calculations.)
Segment profit margin
Segment return on investment
Segment residual income
Part 3: Which of the measurements in Part 2 would you recommend for comparing the performance of the segments? Why?