Assume you are the management accountant for the Foleo Group, and nine months ago you helped Tracey Chen introduce a performance measurement system across the organisation based on ROI as the sole measure. Tracey has now asked you to assist her in assessing the effectiveness of the new system since its introduction for each of the business units and H.O. Departments. To begin the process, she asks you to analyse the Foleo Accessories business-Tracey is quietly confident that performance has improved, considering the bonus payments across the business unit have been paid out each month since the system was implemented. You collect the data you need for your analysis of the performance of Foleo Accessories for the last nine months, compared with the same period last year, and compile it on the document below. Foleo Accessories Comparison Performance Report for 9 months: Last 9 months Same period last year Sales Revenue: $1,609,875 $1,685,818 Variable Costs $998,123 $1,005,823 CONTRIBUTION MARGIN OF FOLEO ACCESSORIES $611,752 $679,995 Less: Controllable Fixed Expenses $62,785 $62,412 $548,967 $617,583 PROFIT MARGIN CONTROLLABLE BY FOLEO ACCESSORIES Less: Traceable Fixed Expenses $217,333 $216,570 PROFIT MARGIN TRACEABLE TO FOLEO ACCESSORIES $331,634 $401,013 Less: Common Fixed Expenses $45,000 $45,000 NET PROFIT BEFORE TAX $286,634 $356,013 Extract from Foleo Accessories Balance Sheet Comparison: Current Same period last year Assets: Current Assets $1,672,145 $2,505,129 Fixed Assets $4,277,208 $5,132,650 TOTAL ASSETS $5,949,353 $7,637,779 Liabilities: Current Liabilities $1,070,674 $1,071,384 Long term Liabilities $3,150,000 $3,300,000 TOTAL LIABILITIES $4,220,674 $4,371,384 (a) From the data you have collected, and knowing that Foleo uses total assets less current liabilities to calculate the Invested Capital component for ROI, calculate the ROIs for current period and for the same period last year for Foleo Accessories. (HINT: Use the profit controllable by Foleo Accessories for your calculations as you are evaluating the business unit. Show all your workings to maximise your marks.) (b) From your analysis above, prepare a brief report for Tracey Chen explaining the ROI results in relation to the Performance Report and Balance Sheet extract, and recommending a course of action. (HINT: Explain why the ROI results are/are not consistent with the business unit's current and past performance in generating profits. Ensure you provide a recommendation.) (c) After reading your report, Tracey is concerned and has asked you to calculate the Residual Income measure for both time periods to see if it more clearly reflects the performance of Foleo Accessories. She advises you that the current required rate of return on the Foleo Group's invested capital is 9.2%. (HINT: Use the same definitions for profit and invested capital as you did in part (a), and show all your workings to maximise your marks.) (d) Are these RI measures consistent with the ROI measures you calculated in part (a)