Froren Pools Inc. sells pools and patio fumiture in twe e in Oktawa and one in Gatineau, and offers an installation service throughout the country for over ten years. Last year. the President has decided to improve its accounting system to record transactions in three autonomous divisions. You will find, in table 1. the income statement at December 31, 2018 You will also find in table 2 the information on total assets of the company. The company requires a minimum rate of return of 2096 The president wants to use this information to evaluate the performance of the three divisions and their managers. A bonus of a golf trip will be granted to the manager showing the best performance REQUIRED 1. The president of Frozen Pools Inc. wants to know whether the current income statement (as shown in table 1) is suitable for decision making and especially for evaluating the performance of each division. a) Explain why the current income statement format is (or is not suitable for decision making. b) Describe an alternative income statement format that would be more suitable for decision making. Explain why it is better. 2. Assuming that the invested capital is equal to the total assets shown in Table 2, calculate for each of the three divisions: a. the rate of return on invested capital (ROI) b. the residual income c. Who is the best manager according to ROI? to Residual Income 3. Provide two advantages and two disadvantages of using ROI in evaluating the performance of a responsibility center. 4. If you were the manager of one of the divisions, what are the strategies you could implement to improve the performance of your division? (provide and explain 3 strategies Table 1 Frozen Pools Ltd. Income statement For the year ended December 31, 2018 Ottawa Gatineau Store Store Installation Services Revenues $700,000 $500,000 $400,000 Cost of goods sold 280,000 290,000 Gross margin Operating expenses 320,000 210,000 400,000 130.000 110,000 180.000 14,000 Salaries Rent (Warehouse) Depreciation - store Amortization - equipment Amortization - trucks Gas and repairs - trucks Fixed common costs (1) 20.000 3.000 6.000 3,000 6,000 30.000 10,000 75.000 131.250 93.750 Total operating expenses Operating income 184.250 $ 135,750 212.750 S-2.750 315.000 $ 85.000 (1) Fixed common costs are allocated based on the revenues. All other expenses are traceable to each division Table 2 : informations on Total assets: Ottawa store $600,000 Gatineau store $130,000 $120,000 Equipment (note 1) Trucks (note 2) $210,000 note 1: The equipment is used for two-thirds (2/3) by the Installation Services and another third (1/3) is divided equally between the two other divisions. note 2: The trucks are used only by the Installation Services division