Titus IncHas Two Divisions - Southeast and Northwest (1)Using the Segmented Income Statements Presented,determine the Profit Margin Ratio

Essay

Titus Inc.has two divisions - Southeast and Northwest.
$\begin{array}{c}\text { Titus Inc.}\\\text { Segmented Income Statements}\\\text { For the Current Fiscal Year Ended December 31}\\\\\begin{array}{lcc}&\text { Southeast } & \text { Northwest } \\&\text { Division }&\text { Division }\\ \text { Sales } & \$ 4,400,000 & \$ 2,600,000 \\ \text { Cost of goods sold } & 2,400,000 & 1,500,000 \\ \text { Gross margin } & 2,000,000 & 1,100,000 \\ \text { Allocated overhead (from corporate) } & 600,000 & 370,000 \\\text { Selling and administrative expenses } & 430,000 & 340,000 \\ \text { Operating income } & 830,000 & 390,00 \\\text { Income tax expense }(35 \%) & 290,500 & 136,500 \\ \text { Net income } & \$ 539.500 & \$ 253.500 \\\end{array}\end{array}$
(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.