Part A Geraldton Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Geraldton expanded into the pre-cut housing market in 2012 when it acquired Delta Company, one of its suppliers. In this market, various types of timber are pre-cut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Geraldton designated the Delta Division as an investment centre. Geraldton uses return on investment (ROI) as a performance measure with investment defined as average assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 17.5 percent before income taxes. Delta's ROI has ranged from 19.7 to 21.5 percent since it was acquired. Delta had an investment opportunity in 2019 that had an estimated ROI of 19.2 percent. Delta's management decided against the investment because it believed the investment would decrease the division's ROI. The division's productive assets were $12, 600,000 at the end of 2019, a 5 percent increase over the 2018 year-end balance. The following data relate to Delta Division for the year ended 31 December 2019 (in $'000s) Sales revenue Cost of goods sold Operating costs: Administrative Selling Required: $24,000 15,800 2,140 3,600 1. Calculate the following performance measures for 2019 for the Delta Division: i) return on investment (ROI) ii) residual income. (5 marks) 2. Would the management of the Delta Division have been more likely to accept the investment opportunity if residual income had been used as a performance measure instead of ROI? Explain your answer in terms of previous investment performance and comparing ROI and RI as measures for this case. (5 marks) IRIS@Curtin is sharing your screen Stop sharing Hide