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Prepare a report monty the operating incomes
Course:- Accounting Basics
Reference No.:- EM131567746




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Problem - Scranton Company has three operating segments. She 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 purpose, 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 Monty 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?




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