Home Division. Commercial Division $3,000,000 7000000 $1,250,000 4900000 $2,400,000 5700000 15% 15% Problem 2A: Evaluating Decentralized Operations (15+2) Sonic Inc. has reported the following information for its Home and Commercial Divisions: Sales: Invested assets: Total costs and operating expenses: Minimum rate of return of the whole company: Required: a) Determine the following for both the Divisions: i) Income from operation: iii) Profit Margin iii) Investment turnover iv) Return on Investment (ROI) using DuPont formula 5) Residual Income 7b) Which division is more efficient in generating revenue and why? 8 9 Home Division. Commercial Division 0 1 Problem 2B (8+4) 2 Sonic has offered a new investment project to the Home Division. 23 The following information is provided about the new project 24 Invested assets: 25 Expected operating income: 26 Therefore, the return on investment: 27 28 Required: 29 a) Calculate the following. If the manager of Home Division accepts the new project: 30 ) Total Operating income 31 ) Total Invested assets 32 ) The total ROI: (Total Income from Operation/Total Invested Assets) 33 iv) The total residual income of the Home Division 34 Total 35 Home division+ New project $1,000,000 $250,000 25.00% 36 b) If Sonic pays bonus using ROI as its performance evaluation tool, do you think the manager of Home division would accept the new project? 37 Why or why not? Explain your answer in the text box below by referring to the calculations for Home Division in Problem 2A and 2B. 38 39 Explanation: 40 41 42