Exercise $14-32($Static$)$ Comparing Business Units Using Residual Income $($LO $14-3)$

Lauderdale Corporation is organized in three geographical divisions $($regions$)$ with managers responsible for revenues,

costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on

divisional performance. Corporate overhead $($all fixed$)$ is allocated to the regions based on regional gross margin

$($regional revenue minus regional cost of sales$).$

The following information is from Lauderdale's first year of operations:

Information on the division assets in the three regions of Lauderdale Corporation follows:

Lauderdale Corporation has a cost of capital of $8\mathrm{.}6$ percent.

Required:

a$.$ Compute residual income for the three regions. Ignore taxes.

b$.$ How have these regions performed?

Complete this question by entering your answers in the tabs below.

How have these regions performed?

$1$a$.$ Based on residual income, which region performed the best?

$1$ b$.$ Based on residual income, which region performed the worst? PLEASE ANWER REQUIRED B$.$ THANKS