Officeworks is a wholesaler and retailer of small home office equipment and stationery items throughout Australia, Its CEO wants to add new product lines whenever a product line shows an increasing trend in profitability. The manager of Officeworks Townsville, Bob Williams, recently proposed to the CEO to expand the Townsville store's printing division to a commercial printing facility, The CCO was reluctant to agree to the move without checking the profitability trends of it's Townsville printing facilities over the last three years, Officeworks makes investment decisions based on its overall return on investment (ROI). Operating results for the company's Townsville Printing division this year are presented below: Sales 17,500,000 Variable expenses 10,500,000 Contribution margin 7,000,000 Fixed expenses 5,600,000 Profit from operations 1,400,000 Divisional average operating assets 7,000,000 The company had a 20% overall return on investment (ROI) this year (for all its divisions]. Next year, the Printing.. division can expand its current printing area to add commercial printing facilities. This would require new Investments that would increase total average operating assets by $2 million, The revenues and costs from the newly added product line would be Sales $3,500,000 Variable expenses 70% of sales Fixed expenses $900,000 Required: a. Calculate the Printing division's ROI for the current year. Show all workings. (3 marks] b. Compute the Printing division's ROI after the commercial printing division starts operating in the refurbished area next year. If you were in Bob William's position, advise, providing reasons, if you would accept or reject the new commercial printing product line. (5 marks) Officeworks uses a 14% minimum rate of return on operating assets when residual income is used to evaluate any project's performance. L Calculate the Printing division's residual income for next year, assuming that Townsville Officeworks has added the commercial printing facilities to its Printing Division, Advise if the new residual income, after accepting the new product line, is higher than the current level of residual Income. (6 marks) If a residual income approach is used to evaluate the expansion into commercial printing, advise if the new product line should be accepted or rejected. (2 marks)