Question 2: Compare ROI and Residual Income (12 marks) Northern Pride Inc a diversified company operates four departments. The company has collected the following departmental information for 2020: Required: Part 1 a. Calculate ROI (column G) and rank the four departments (column H) based on their return on investment (ROI). The highest ranking should be scored as 1 and the lowest ranking should be 4. (3 marks) b. Calculate residual income (column I) and rank the four departments (column)) based on their residual income. (3 marks) The highest ranking should be scored as 1 and the lowest ranking should be 4. Assume that the company requires a minimum return on the current investment of: 20% a Parta Part b Ranking Residual Based on Income (in Residual dollars) Income Ranking Based on ROI ROLA percentage Average Cost of Goods Operating Operating Department Sales Operating Sold Expenses Income sets A $2,000,000 $ 1.200,000 $300,000 $ 500,000 $1,750,000 B 1,000,000 400.000 200,000 $400,000 1,800,000 300,000 150,000 60,000 $ 90,000 500,000 D 275,000 125,000 45,600 $ 104,400 400,000 ***Formulas or cell references must be used to receive marks for all questions in this exam.*** Part 2: Each department manager has been presented with a new investment opportunity that promises a 19% return on investment (ROI). Which department(s) are likely to accept or relect the opportunity if their performance is measured by (2 marks): 1. ROI2 2. Residual income? Department 1. Evaluated 2. Evaluated based on ROI based on Residual Income A B D 3. Why will the departments accept or reject if they are evaluated based on ROI? Explain your answer in a way that a non-accountant can understand. (2 marks) 4. Why will the departments accept or reject if they are evaluted based on Residual Income? Explain your answer in a way that a non-accountant can understand. (2 marks)