(a) The following information is available for Vic Company:

Operating income $62,000

Sales $459,000

Beginning operating assets $210,000

Ending operating assets $380,000

(Round up all answers to the nearest 2 decimal place)

(i) What is Vic Company's Return on Investment (ROI)?

(ii) Suppose that the company sets a minimum rate of return of 12%, what is the residual income?

(iii) Give ONE (1) advantage and ONE (1) disadvantage of using residual income as a performance evaluation tool.

(b) Ecomask Company makes reusable masks and sells them at $5 each. Union Bus Company wants to purchase 10,000 reusable masks at $3 each to give to its bus drivers. Cost per mask are as follows:

Direct materials $1.00

Direct labour 0.50

Variable overhead 0.70

Fixed overhead 0.90

Ecomask Company is operating significantly below the maximum productive capacity. No variable selling and marketing costs would be incurred. All fixed overhead costs are unavoidable.

However, Union Bus Company wants its own logo on the masks. The additional cost of printing the logo is $0.10 per mask.

(i) Should Ecomask Company accept the special order from Union Bus Company? By how much would profit increase or decrease if the order is accepted?

(ii) List TWO (2) qualitative considerations that Ecomask Company should consider when making the special order decision.