Following is operating information relative to Tyee Corporation:

Balance Sheets:

Jan 1, 2013 Dec 31, 2013

Cash $100,000 $150,000

Accounts Receivable 500,000 600,000 Inventories 600,000 800,000

Equipment, net 1,000,000 800,000 Total Assets $2,200,000 $2,350,000

Sales during the year totaled $10,000,000 and operating income was $500,000. Use the average of operating assets to determine operating assets.

Required:

1. Calculate the operating margin.

2. Calculate the turnover.

3. Calculate the ROI using the DuPont formula.

4. If the parent company wants a 15% return on its average operating assets, what is the residual income? Show calculations.

5. List at least two deficiencies of the ROI method of measuring performance and discuss your reasons.