QUESTION 3 (10 MARKS) The following information is extracted from Automotive Division for the year ended 31st December 2021:

The cost of capital for the division is estimated at 8% each year.

You are required to calculate:

i) Calculate the divisional Return on Investment (ROI) for the year ended 31st December 2021 using net assets approach. (4 marks)

ii) Calculate the Residual Income (RI) for the year ended 31 December 2021. (5 marks)

iii) Define decentralization structure in business. (1 marks)

Statement of Financial Position RM Non-current Assets 120,000 Current Assets 67,000 Income Statement RM Revenue 115,000 Cost of Goods Sold (COGS) (48,000) () Other operating (10,000) expense Operating Profit 57,000 (Interest Paid (17,000) Profit Before Tax 40,000 TOTAL ASSETS 187,000 Divisional Equity Long Term Liabilities Current Liabilities TOTAL EQUITY & LIABILITIES 93,700 75,000 18,300 187,000