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 $15$ percent before income taxes. Fairmont's ROI has ranged from $19\mathrm{.}6$ to $22\mathrm{.}8$ percent since it was acquired. Fairmont had an investment opportunity in $201$ that had an estimated ROI of $18$ percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The $201$ income statement for Fairmont Division follows. The division's productive assets were $$46,200,000$ at the end of $201,$ a $5$ percent increase over the balance at the beginning of the year.

Required:

$1-$a$.$ Calculate the return on investment $($ROI$)$ for $201$ for the Fairmont Division.

$1-$b$.$ Calculate residual income for $201$ for the Fairmont Division.

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Req $1A$

Calculate the return on investment $($ROI$)$ for $201$ for the Fairmont Division.