The following data pertain to Dakota Division's most recent year of operations. Income $ 16,999,999 Sales revenue 185,999,999 Average invested capital 62,999,999 Assume that the company's minimum desired rate of return on invested capital is 14 percent. Required: Compute Dakota Division's residual income forthe year. :l 5 Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company. one of its suppliers. In this market. various types of lumber are precut into the appropriate lengths, banded into packages. and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 16 percent before income taxes. Fairmont's ROI has ranged from 29.4 to 32.6 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 28 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement i'ces. for Fairmont Division follows. The division's productive assets were $14,700,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year. 0k FAIRMONT DIVISION Income Statement For' the Year' Ended December 31, 28x1 (in thousands) Sales r'evenue $63,610 Cost of goods sold 40,600 Gross margin $23,010 Operating expenses: Administrative $ 5,180 Selling 13,525 18,705 Income 'From operations before income taxes $ 4,305 Exercise 13-29 Part 2 2. Would the management of Fairmont Division have been more likely to accept the investment opportunity it had in 20x1 if residual 2. Would the management of Fairmont Division have been more likely to accept the investment opportunity it had in 20x1 if residual income were used as a performance measure instead of ROI? 0 Yes O No Day Street Deli's owner is disturbed by the poor profit performance of his ice cream counter. He has prepared the following profit analysis for the year just ended. Sales $85, 000 Less: Cost of food 40, 000 Gross profit $45, 000 Less: Operating expenses: Wages of counter personnel $20, 000 Paper products (e.g., napkins) 8,000 Utilities (allocated) 4,900 Depreciation of counter equipment and furnishings 4,500 Depreciation of building (allocated) 8,090 Deli manager's salary (allocated) 5 ,000 Total 50, 400 Loss on ice cream counter $ (5, 400) Required: Correct the owner's profit analysis for the year just ended. Less: Operating expensesRequired: Correct the owner's profit analysis for the year just ended. 'S Less: Operating expenses Total