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GIVEN: Moore 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?
Expert Answer
