Question
Duggan Industries, Inc. (DII) is a large multinational corporation that offers various services in a number of different countries. The company is currently preparing its
Duggan Industries, Inc. (DII) is a large multinational corporation that offers various services in a number of different countries. The company is currently preparing its segmented financial reports. Identify and explain whether each of the business units described below should be reported as an operating segment, or should be aggregated with other DII business units. (a) DII recently began offering consulting services in South America, and has the following results for the year just ended: Brazil, 1% of total revenue; Chile, 3% of total revenue; Argentina 1.5% of total revenue; Costa Rica, 2% of total revenue. Due to the nature of the consulting services, very few assets are required by the South American operations. Similar regulatory requirements exist in each of these countries. (b) DIIs northern division has extremely high expenses, and while it generates 18% of DIIs revenue, its net profit is less than 2% of DIIs total profit. (c) DIIs European division uses 12% of DIIs total assets. (d) DII owns and operates Eastern Canadian Delivery Services and Western Canadian Delivery Services. Both subsidiaries use similar delivery methods, and are subject to the same regulatory requirements. Many of the customers operate throughout Canada, and purchase services from both companies. Eastern earns approximately 7% of DIIs total profit while Western earns approximately 8%.
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