Reference no: EM132502426

Thriftco operates a chain of retail stores. The following data are for the stores of the Plains Division for the most recent year (in thousands of dollars).

                                  Fargo                    SiouxFalls                         Omaha

Sales                                1,200                 1300                          1500

Cost of Goods Sold             624                      728                           750

Gross Margin                      576                        572                           750

Expenses:Occupancy            62                          66                              74 (Depreciation, property tax, insurance, utilities)

Salaries/wages                     297                          333                            389

Advertising                            60                           56                            82 (50% local, 50% allocated corporate advertising)

Miscellaneous                            5                                6                                       7

Overhead                                  108                         117                            135 (general corporate overhead, allocated at 9% of sales)

                                               532                              578                         687

Segment margin                              44                              -6                               63

Average operating assets                        1,000                     950                         1,100

Required:

Question a) Recompute segment margin, using concepts learned in class. Use the recomputed numbers to answer the remaining questions.

Question b) Is the Sioux Falls store really losing money? Explain briefly.

Question c) Compute ROI for each store.

Question d) Compute residual income for each store, assuming that Thriftco's target ROI is 15%.

Question e) Which is the top performing store? Identify the main reason for its superior performance.