Jairncorp has three independent segments.
Sales
Net operating income
Average operating assets
Minimum required rate of return
Required:
Determine the ROI and Residual Income for each.
Compute the ROI for Segment A, B and C.
Margin
Turnover
ROI
Compute the residual income for Segment A, B and C.
Segment A
Segment B
Segment C
$\hspace{0.2cm}6,400,000
$\hspace{0.2cm}1,365,000
$\hspace{0.2cm}7,600,000
15%
$\hspace{0.2cm}37,000
$\hspace{0.2cm}12,500
$\hspace{0.2cm}66,000
14%
$\hspace{0.2cm}16,900
$\hspace{0.2cm}800
$\hspace{0.2cm}19,000
16%
Segment A
Segment B
Segment C
21%
34%
5%
0.84
0.56
0.89
18%
19%
4%
Net operating income
Minimum required return on average operating assets
Residual Income
Segment A
$\hspace{0.2cm}1,140,000
Segment B
Segment C
$\hspace{0.2cm}9,240
$\hspace{0.2cm}3,040