Hamilton Ltd is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand$-$alone divisions using financial metrics such as ROI and residual income. For the year ended $31$ December $2017,$ Hamilton's CFO received the following information about the performance of the property$/$casualty division:

For the purposes of divisional performance evaluation, Hamilton defines investment as total assets, and income as operating profit $($i$.$e$.$ profit before interest and taxes$).$ The firm pays a flat rate of $\backslash (25\backslash \%\backslash )$ in taxes on its income.

Required

$1.$ What was the net profit after taxes of the property$/$casualty division?

$2.$ Calculate the division's ROI for the year.

$3.$ Based on Hamilton's required rate of return of $\backslash (8\backslash \%\backslash ),$ calculate the property$/$casualty division's residual income for $2017.$

Question $2$

ABC Ltd has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of $\backslash (16\backslash \%\backslash )$ of direct labour cost. Month direct labour cost for the satin sheet range is $\backslash (\backslash$$ $147,000\backslash ).$ In an attempt to distribute quality control cost more equitably, ABC Ltd is considering activity$-$based costing. The following data relates to monthly quality control costs for its satin sheet range:

Required:

Calculate the monthly quality control cost to be assigned to the satin sheet product line under Activity$-$based costing