Question 2 (10 Marks) Division P of Copy Ltd manufactures and sells portable printers that have a selling price of $80 per unit in 2018. A competitor is introducing a new portable printer that will sell for $70. The manager of Division P believes it must lower the price in 2019 to $70 to compete in the printers market. The manager believes that the new price will maintain the current sales level of 10,000 printers per year in 2019. Division P carries no inventories. Budgeted data of Division P for 2019 are as follows: $100,000 Current assets $300,000 Non-current assets $400,000 Total assets Production output (printers per year) 10,000 Target Return on Investment (ROI- Operating income/Total assets) 20% Current fixed costs per year (2018) $300,000 Current variable cost per printer (2018) $40 Consider each of the following three situations independently. Required: a. What is the target cost per unit for the new price per printer to achieve the target Return On Investment (ROI)? What is the cost reduction per unit to achieve this (4 marks) target cost? b. Assume that current fixed costs per year cannot be reduced, total assets in 2018 are $400,000, and the minimum required rate of return is 15%. If the manager of Division P is evaluated and compensated on the basis of Residual Income (RI), what should be the target variable cost per unit to increase 2018's RI by 10% in 2019? (3 marks) c. The CEO of Copy Ltd has heard about Economic Value Added (EVA) as an alternative method to evaluate performance of its Divisions. She asks you for advice to decide whether to change RI as the current basis for performance evaluation, and use EVA to evaluate performance. Explain briefly how EVA is similar to RI. In addition, identify one advantage and one disadvantage of EVA compared with RI