1. Defacto manufactures and sells baseballs. Assume production equals sales. Budget data for Aug. 2021 are as follows:

Current assets	$ 400,000
Long-term assets	600,000
Total assets	$1,000,000
Production output	200,000 baseballs per month
Target Return on Investment (ROI)	18%
Fixed costs	$400,000 per month
Variable cost	$4 per baseball

Required:

1. Compute the minimum selling price per baseball necessary to achieve the target ROI of 18%.
2. Separate the target ROI into its two components Margin and Turnover.
3. Compute the Residual Income (RI) of the Defacto for Aug. 2021, using the selling price from requirement 1. Defacto uses a required rate of return of 12% on total assets when computing RI.
4. In addition to his salary, Ahmed, the manager of Defacto, receives 3% of the monthly RI as a bonus. Compute Ahmad's bonus.

2. Define the following terms: Differential cost and Opportunity cost.