QUESTION 6 (11 marks) The baseball division of Home Run Sports manufactures and sells baseballs. Assume production equals sales. Budgeted data for February 2011 are as follows: Current assets $ 400,000 Long-term assets 600,000 Total assets $1,000,000 Production output 200,000 baseballs per month Target ROI (Operating income/Total assets) 30% Fixed costs $400,000 per month Variable cost $4 per baseball Required: a Compute the minimum selling price per baseball necessary to achieve the target ROI of 30%. (3 marks) b. Using the selling price from part a), separate the target ROI into its two components using the DuPont method. (2 marks) c. Compute the RI of the baseball division for February 2011, using the selling price from part a). Home Run Sports uses a required rate of return of 12% on total division assets when computing division RI. (2 marks) d. In addition to her salary, Pamela Stephenson, the division manager, receives 3% of the monthly RI of the baseball division as a bonus. Compute Stephenson's bonus. (2 marks) e. What is the advantage to Home Run Sports when it compensates division manager with a bonus based on RI, in addition to salary? (2 marks)