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GIVEN: 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:
Alpha
Beta
Delta
Revenues
$790,000
$1,245,000
$990,000
Operating Expenses
$560,000
$960,000
$700,000
Invested Assets
$1,600,000
$2,000,000
$2,080,000
Number of Transactions
120,000
150,000
130,000
Desired Minimum ROI
12.0%
12.0%
12.0%
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:
Accounting Department (number of transactions)
$60,000
Corporate Headquarters’ Costs (per revenue dollar)
$810,000
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?
You are to work independently on this assignment. When you submit your work for grading please use the following file name: your last namefirst name RespAcct>. This assignment is worth up to 12 points.
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