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Operating Profit Margin, Asset Turnover, Return on Investment (ROI), and Residual Income (RI). Financial information for Livingston Tech Support, Inc., for the most recent fiscal year appears as follows. All dollar amounts are in thousands. Livingston Puch Support Segreted Income for the Create Your Idolar amets are in thousands Cast of goose Alarated and face) $3000 $8.50 100 145 Livingston Ted Supportin Segmented Balance Sheets at End of Mastecent Fiscal dolor amounts are in thousands Ending beginning Division Ending Beginning $ 1,150 100 Accounts sociale nary Property plant and equipment Invent in Gachot in 510250 516,190 610 1,150 300 Other current Lorem 450 Totes and we 510,100 Required: a. Calculate average operating assets for each division. (Hint: land held for sale and investments in Global, Inc., are not operating assets.) b. Calculate operating profit margin, asset turnover, and return on investment for each division. c. Calculate residual income for each division assuming a cost of capital rate of 12 percent. d. What does the information from requirements band e tell us about each division? Livingston Tech Support, Inc. Segmented Income Statements for the Current Fiscal Year (dollar amounts are in thousands) Web Division IT Division $ 9,000 2,700 $ 6,300 1,800 Sales Cost of goods sold Gross margin Allocated overhead (from corporate) Selling and administrative expenses Operating income Income tax expense (30% rate) Net income $ 6,000 2,300 $ 3,700 1,200 1,850 $ 650 195 $ 455 3,350 $ 1,150 345 805 Livingston Tech Support, Inc. Segmented Balance Sheets at End of Most Recent Fiscal Year (dollar amounts are in thousands) Web Division IT Division Assets Cash Accounts receivable Inventory Total current assets Property, plant and equipment (net) Investment in Global, Inc. Land (held for sale) Total assets Ending Beginning Balance Balance $ 400 $ 390 300 310 800 730 $ 1,430 2,000 1,800 $ 1,500 Ending Beginning Balance Balance $ 1,100 $ 1,150 600 620 950 900 $ 2,650 $ 2,670 6,100 6,020 1,500 1,500 0 0 $10,250 $10,190 2,100 $ 5,600 2.100 $ 5,330 Liabilities and owners' equity Accounts payable Other current liabilities Total current liabilities Long-term liabilities Total liabilities Total owners' equity Total liabilities and owners' equity 590 160 $ 750 0 $ 750 4,850 $ 5,600 610 145 $ 755 0 $ 755 4,575 $ 5,330 1,150 420 $ 1,570 0 $ 1,570 8,680 $10,250 980 300 $ 1,280 0 $ 1,280 8,910 $10,190 a. IT Division Ending Beginning Balance Balance Operating Profit Margin, Asset Turnover, ROI, and RI (Note: All dollar amounts are in thousands as presented in the textbook.) Web Division Ending Beginning Balance Balance Total assets $5,600 Less: Land held for sale ( 2.100) Less: Investment in Global Inc. Total operating assets $3,500 Average operating assets Incorrect Incorrect b. Web Division IT Division Web Division is IT Division is $650 $6,000 Correct Correct Incorrect Incorrect Incorrect Incorrect Operating profit margin Operating Income Sales (round to nearest hundredth %) Asset turnover = Sales Average Operating Assets (round to nearest hundredth) ROI = Operating Profit Margin * Asset Turnover Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Operating Profit Margin, Asset Turnover, ROI, and Residual Income (continued) c. Residual income in thousands) is calculated as follows: Residual income Operating income Percent cost of capital X Average operating assets Web Division Residual income 12% (round to nearest dollar) Incorrect IT Division Residual income (round to nearest dollar) Incorrect

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