(1) Grenada Manufacturing Inc. has a single product called a Carib. The company normally produces and sells 80,000 Caribs each year at a selling price of $40 per unit. The company's unit costs at this level of activity are given below:

Direct materials	$ 9.50
Direct labour	10.00
Variable manufacturing overhead	2.80
Fixed manufacturing overhead	5.00
Variable selling expenses	1.70
Fixed selling expenses	4.50
Total cost per unit	$33.50

The total fixed manufacturing overhead is $400,000 and fixed selling is $360,000. The Grenada Manufacturing Inc. has sufficient capacity to produce 100,000 Caribs each year. The company has an opportunity to sell 20,000 units in an overseas market. Import duties, foreign permits, and other special costs associated with the order would total $14,000. The only selling costs that would be associated with the order would be $1.50 per unit shipping cost.

Alternatively, the company could use the spare capacity to introduce another product called Arawak which it would retail at a price of $60 and produce and sell the 20,000 units. The companys unit costs for the new product would be as follows:

Direct materials	$11.40
Direct labour	$12.00
Variable manufacturing overhead	$3.36
Fixed manufacturing overhead	$6.00
Variable selling expenses	$2.04
Fixed selling expenses	$5.40
Total cost per unit	$40.20

Required

i. Using Cost Volume Profit Analysis determine the break-even for this special order of producing the additional Caribs to be sold in the overseas market using the $40 sales price. [3 marks]

ii. Compute the break-even units for the Company if they sell only the existing product of Carib. [4 marks]

iii. Compute the break-even units for the Company if they introduce the new product of Arawak to use the additional space. [6 marks]

(2) Jabari Products Inc. has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million. The cost of equity capital for Jabari Products Inc. is 12%, and its tax rate is 35%. Jabari Products Inc. has three divisions, which operate autonomously. Their results for 2012 were as follows:

	East	West	International
Sales	$30,000,000	$40,000,000	$50,000,000
Cost of goods sold	15,000,000	25,000,000	37,000,000
Operating income	4,500,000	4,750,000	5,000,000
Investment base	30,000,000	30,500,000	31,000,000

The company's desired rate of return is 15%.

Required:

i. Compute each division's ROI. [3 marks]

ii. Compute each division's residual income. [3 marks]

iii. Compute the company weighted average capital (WACC) [3 marks]

iv. Using a WACC of 15% compute the EVA for each department. [3 marks]