a. Div1 and Div2 are two divisions of a large company and are treated as investment centres. Every year they each prepare an operating statement to be submitted to the parent company. Operating statements for these two divisions for 201X are shown below:

Operating Statements:	Div1	Div2
	(000s)	(000s)
Sales revenue	9,000	5,550
Less variable costs	3,450	3,120
Contribution	5,550	2,430
Less controllable fixed costs (includes depreciation on divisional assets)	950	550
Controllable income	4,600	1,880
Less apportioned central costs	3,380	1,800
Net income before tax	1,220	80
Less tax @ 25%	305	20
Net income after tax	915	60
Additional information:
Total divisional net assets (000s)	8,000	500
Divisional cost of capital	14%	15%

The annual depreciation charges for Div1 and Div2 in 201X were 300,000 and 50,000, respectively. These have already been accounted for in the figures above.

Div1 and Div2 operate in different market environments, but the target return for both divisions is 12%.

(i)Calculate the Return on Investment (ROI) for Div1 and Div2 for 201X, and discuss the relative performance of the two divisions using the ROI data and other information given above.

(ii)Calculate the Residual Income (RI) for Div1 and Div2 for 201X, and explain the implications of this information for the evaluation of each division's performance.

(iii)Explain your treatment of divisional depreciation and taxation in (i) and (ii) above.