variances. Question 4 Remax Industries produces tool and die machinery for manufacturers. The company expanded vertically in 2021 by acquiring one of its suppliers of alloy steel plates, Kenzen Steel Company. To manage the two separate businesses, the operations of Kenzen are reported separately as an investment centre. Remax monitors its divisions on the basis of both unit contribution and return on average investment (ROI), with investment defined as average operating assets employed. Management bonuses are determined on ROI. All investments in operating assets are expected to earn a minimum return of 13% before income taxes. Kenzen's cost of goods sold is considered to be entirely variable, while the division's administrative expenses are not dependent on volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Kenzen contemplated a capital acquisition with an 0,75 Assignment 1 Marks: 100 Due: 4 Sept 2023 estimated ROI of 14.5%; however, division management decided against the investment because it believed that the investment would decrease Kenzen's overall ROI. The 2022 operating statement for Kenzen is as follows: Sales revenue Kenzen Steel Company Operating Statement For the year ended 30 November 2022 Less expenses: Cost of goods sold Administrative expenses Selling expenses Assign g. R25 000 000 h. (R23 155 000) R16 500 000 R3 955 000 R2 700 000 R1 845 000 5 Operating income before income taxes The division's operating assets employed were R12 600 000 on 30 November 2023, a 5% increase over the 2022 year-end balance. Required: 4.1 4.2 4.3 4.4 Calculate the unit contribution for Kenzen Steel Company if 1 187 000 units were produced and sold during the year ended 30 November 2022. Calculate the following performance measures for 2022 for Kenzen Steel Company: Pre-tax return on average investment in operating assets employed (ROI) Residual income calculated on the basis of average operating assets a. b. employed. Explain why the management of Kenzen Steel Company would have been more likely to accept the contemplated capital acquisition if residual income rather than ROI were used as a performance resource. Kenzen Steel Company is a separate investment centre within Remaz Industries. Identify several items that Kenz should control if it is to be evaluated fairly by either the ROI or residual performance measures. Question 5 Re P