ROI and RI. (D. Kleespie) The Gaul Company produces and distributes a wide variety of recreational products. One of its divisions, the Goscinny Division, manufactures and sells

/menhirs,” which are very popular with cross-country skiers. The demand for these menhirs is relatively insensitive to price changes. The Goscinny Division is considered to be an invest¬
ment centre and in recent years has averaged a return on investment of 20%. The following data are available for the Goscinny Division and its product:
Total annual fixed costs Variable costs per menhir Average number ofmenhirs sold each year Average operating assets invested in the division $1,200,000 $ 360 10,000 $1,920,000 Required 1. What is the minimum selling price per unit that the Goscinny Division could charge in order for Mary Obelix, the division manager, to get a favourable performance rating?
Management considers an ROI below 20% to be unfavourable.
2. Assume that the Gaul Company judges the performance ofits investment centre managers on the basis of residual income rather than ROI, as was assumed in requirement 1. The company’s required rate of return is considered to be 15%. What is the minimum selling price per unit that the Goscinny Division should charge for Obelix to receive a favourable performance rating?