Reference no: EM131567746

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?