Financial data for three different divisions of the same company, for last year, appear below:

DivisionA%B%C%Company Total %

Sales$3,200,000$3,500,000$5,000,000

VariableCosts1,450,0001,750,0002,750,000

Traceable FixedCosts1,250,0001,350,0001,450,000

Segment Margin

Common FixedCosts:1,500,000

PART I: Complete the above table showing the Contribution Margin Ratio(CMR), and the segment margin for each of the segments. Determine the CMR for the company as a whole .If the company were to add a new division, what information from the above would you use to assist in the decision-making?

DivisionABCCompanyTotal

Average Operating Assets$4,000,000$4,375,000$4,000,000

[AOA]

SegmentMargin

Turnover [T/O]

ROI

Minimum Required Rate of Return for theindustry

[MRROR] @8%

Residual Income [RI]

Required:Complete the above comparison and answer the questions that follow

Here are the formulas for:

Margin- >OITurnover- >SalesROI-> Margin x Turnover

SalesAOA

RI -> OI - (MRROR x AOA)

1. Compute each division's turnover and ROI for the reporting period. Explain what is meant by "turnover"
2. In the industry the average MRROR is 8%. Determine the residual income (RI) for each division. What is the sigfnificance of the MRROR? Why is RI a better measure of performance than ROI?
3. If sales in the industry increased by 10%, without any increase in operating assets, which company would show the highestlargest change in operating income? Why?
4. If an expansion program that would require new investments of $1,000,000 in operating assets were undertaken, which division would you recommend in order to produce the highest return? Why?