Lawton Homes, founded by a former vice-president of Haniwall Industries in P11.45A, has been manufacturing prefabricated houses for the past five years. To compete with Haniwall, Lawton also expanded into the precut housing market by acquiring one of its suppliers, Presser Company. After designating Presser as an investment centre, Lawton next decided to use the ROI as a performance measure and to give managers bonuses that are partly based on the ROI. Lawton defines investments as average productive assets and expects a minimum return of 12% before income taxes. Pressers ROI has averaged 16.50% since it was acquired. In 2020, Presser found an investment opportunity that would have an estimated ROI of 15%. After analyzing the opportunity, Pressers management finally decided not to make the investment because management did not want the divisions overall ROI to decrease. The 2020 income statement for Presser follows. The division had operating assets of $26.25 million at the end of 2020, which was a 5% increase over the 2019 year-end balance.

Lawton Homes, founded by a former vice-president of Haniwall Industries in P11.45A, has been manufacturing prefabricated houses for the past five years. To compete with Haniwall, Lawton also expanded into the precut housing market by acquiring one of its suppliers, Presser Company. After designating Presser as an investment centre, Lawton next decided to use the ROI as a performance measure and to give managers bonuses that are partly based on the ROI. Lawton defines investments as average productive assets and expects a minimum return of 12% before income taxes. Presser's ROI has averaged 16.50% since it was acquired. In 2020, Presser found an investment opportunity that would have an estimated ROI of 15%. After analyzing the opportunity, Presser's management finally decided not to make the investment because management did not want the division's overall Rol to decrease. The 2020 income statement for Presser follows. The division had operating assets of $26.25 million at the end of 2020, which was a 5% increase over the 2019 year-end balance. PRESSER DIVISION Income Statement Year Ended June 30, 2020 (in thousands) Sales revenue Cost of goods sold Gross margin Operating expenses Administrative Selling Income from operations before income taxes $46,000 30,300 15,700 $4,110 6,465 10,575 $5,125 (a) Calculate the following performance measures for 2020 for the Presser division: (1) The return on investment % (2) The residual income $