42. 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 Tech Support, Inc. Segmented Income Statements for the Current Fiscal Year (dollar amounts are in thousands) Web Division IT Division Sales $ 7,000 $ 12,000 Cost of goods sold 2,300 2,700 Gross margin $ 4,700 $ 9,300 Allocated overhead (from corporate) 1,200 1,800 Selling and administrative expenses 2,650 3,350 Operating income $ 850 $ 4,150 Income tax expense (30% rate) 255 1,245 Net income $ 595 $ 2,905 42. Operating Profit Margin, Asset Turnover, ROI, and RI (Note: All dollar amounts are in thousands as presented in the textbook.) IT Division Beginning Balance a. Web Division Livingston Tech Support, Inc. Segmented Balance Sheets at End of Most Recent Fiscal Year (dollar amounts are in thousands) Ending Balance Beginning Balance Ending Balance Total assets $5,800 Less: Land held for sale (2,100) Less: Investment in Global Inc. Web Division IT Division Total operating assets $3,700 Ending Balance Beginning Balance Ending Balance Beginning Balance Average operating assets Incorrect Incorrect Assets Cash $ 600 $ 390 $ 1,500 $ 1,150 b. Web Division IT Division Web Division is IT Division is Accounts 300 310 600 620 Operating profit margin = receivable Operating Income Inventory 800 730 950 900 Sales $850 $7,000 Total current $ 1,700 $ 1,430 $ 3,050 $ 2,670 assets Property, plant and (round to nearest hundredth %) Asset turnover = Average Operating Assets (round to nearest hundredth) ROI = Correct Incorrect Correct Incorrect Incorrect Incorrect Sales 2,000 1,800 6,100 6,020 equipment (net) Operating Profit Margin × Asset Turnover Investment in Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Incorrect Global, Inc. 1,500 1,500 42. C. Land (held for sale) Operating Profit Margin, Asset Turnover, ROI, and Residual Income (continued) Residual income (in thousands) is calculated as follows: 2,100 2,100 0 0 Total assets $ 5,800 $ 5,330 $ 10,650 $ Residual income Operating income 10,190 Percent cost of capital x Average operating assets Liabilities and owners' equity Web Division Residual income 12% x (round to nearest dollar) Incorrect Accounts payable Other current 790 $ 610 $ 1,550 $ 980 IT Division Residual income (round to nearest dollar) Incorrect 160 145 420 300 liabilities Total current $ 950 $ 755 $ 1,970 $ 1,280 liabilities Long-term 0 0 0 0 liabilities Total 950 $ 755 $ 1,970 $ 1,280 liabilities Total owners' 4,850 4,575 8,680 8,910 equity Total liabilities and $ 5,800 $ 5,330 $ 10,650 $ 10,190 owners' equity 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.