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:
|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|
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?