Delta Corporation has two divisions: Epsilon and Gamma

The company is adopting a responsibility accounting approach to setting budgets and rewarding employees and is reviewing the best way to measure performance of its investment divisions

The firm has a long term cost of capital of 24%. The following information is relating to the firms trading figures. The company does not allocate the cost of long term debts to its divisions.

Epsilon Division Gamma Division Total Sales 6,250,000 1,150,000 7,400,000 Less: Direct Labour & Materials 4,250,000 375,000 4,625,000 Other Expenses 150,000 75,000 225,000 4,400,000 450,000 4,850,000 Operating Income 1,850,000 3,700,000 2,550,000 Interest on Long-Term Debt 400,000 Net Income Before Tax 2,150,000 Average Book Values Total Assets 7,500,000 8,500,000