Titus Inc.
Segmented Income Statements
For the Current Fiscal Year Ended December 31
	Southeast Division	Northwest Division
Sales	$4,400,000	$2,600,000
Cost of goods sold	2,400,000	1,500,000
Gross margin	2,000,000	1,100,000
Allocated overhead (from corporate)	600,000	370,000
Selling and administrative expenses	430,000	340,000
Operating income	830,000	390,000
Income tax expense (35%)	290,500	136,500
Net income	$ 539,500	$ 253,500

Required:

(1) Using the segmented income statements presented, determine the profit margin ratio for each division.

(2) Assume the Southeast division had average operating assets totaling $6,000,000 for the year, and the Northwest division had average operating assets totaling $1,800,000. Calculate return on investment (ROI) for each division.

(3) Assume Titus has a cost of capital rate of nine percent. Calculate residual income for each division.