Case II: Segment Reporting and Performance Evaluation

The questions in this case are based on FedEx Corporation. To answer the questions, you will need to download FedEx's202210-K or annual report for the fiscal year endedMay 31, 2022at the following website:www.sec.gov/edgar/searchedgar/companysearch.html.

Once at this website, input CIK code "0001048911" and hit enter. In the box under "Selected Filings", click on "10-K and 10-Q". Click on "View all 10-Ks" and select the 10-K with a filing date of July 18, 2022. You do not need to print this document to answer the questions below.

Alternatively, you may go to FedEx website and download its 2022 Annual Report.

Required:

1. What is FedEx's strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? Support your conclusion with specific evidence identified in the 10-K filing.
2. (a) What are FedEx's four main business segments? (b) Provide two examples of traceable fixed costs for each of FedEx's four business segments. (c) Provide two examples of common costs that are not traceable to the four business segments.
3. Identify one example of a cost center, a profit center, and an investment center for FedEx.
4. Compute the profit margin, turnover, and return on investment (ROI) in 2022 for each of FedEx's four business segments. (Hint: Notes to Consolidated Financial Statements - Note 15 "Business Segments and Disaggregated Revenue" reports segment operating income and segment assets for each business segment).
5. Assume that FedEx established a minimum required rate of return of 15% for each of its business segments. Compute the residual income earned in 2021 in each of FedEx's four segments.

Assume that the senior managers of FedEx Express and FedEx Ground each have an investment opportunity that would require $20 million of additional operating assets and that would increase operating income by $4 million. (a) If FedEx evaluates all of its senior managers using ROI, would the managers of both segments pursue the investment opportunity? Explain why. (b) If FedEx evaluates all of its senior managers using residual income, would the managers of both segments pursue the investment opportunity? Explain why.