Morgan Industries manufactures die machinery. To meet its expansion needs, it recently acquired one of its suppliers, Vienna Steel in 2000. To maintain Viennas separate identity, Morgan reports Viennas operations as an investment strategic business unit (SBU). Morgan monitors all of its investment SBUs on the basis of return on investment (ROI). Management bonuses are based on ROI, and all investment SBUs are expected to earn a minimum return of 12 percent before income taxes. Viennas ROI has ranged from 14 percent to 18 percent since 2000. The company recently has the opportunity for a new investment that would have yielded 13 percent ROI. However, division management decided against the investment because it believed that the investment would decrease the divisions overall ROI. The 2002 operating statement for Vienna follows. The divisions operating assets were $13,000,000 at the end of 2002, and $12,264,150 in 2001. VIENNA DIVISION Operating Statement For Year Ended December 31, 2002 Sales $25,000,000 Cost of goods sold 16,600,000 Gross profit 8,400,000 Operating expenses Administration $2,340,000 Selling 3,810,000 6,150,000 Income before income taxes $2,250,000 REQUIRED 1. Calculate the following performance measures for 2002 for Vienna division: a. Return on Investment (ROI), where investment is defined as the average investment in operating assets employed. (6 marks) b. Residual Income (RI) calculated on the basis of average operating assets employed.

Q2. Beaufort Ltd is introducing a new range of products. It has established that the target selling prices of the three products are $120, $150 and $210. Beaufort requires a profit mark-up on cost of 33.3 per cent for all its products. What percentage of the target prices is the target cost in each case? A. 50% B. 60% C. 66.7% D. 75%