Situation: Office Supplies Ltd has a geographical structure with two divisions aligned with its two markets:...

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Situation: Office Supplies Ltd has a geographical structure with two divisions aligned with its two markets: Sydney and Brisbane. The following data is provided for the two divisions for the year 2019: Sydney Brisbane Sales Contribution margin ratio Fixed costs $280,000 $190,000 Divisional investments $200,000 $280,000 Common costs for the year totalled $70,000 and were allocated based on sales. RI before investment is made $600,000 52% The management of Office Supplies Ltd faced an investment opportunity, which would require an investment of $50,000 in 2020 and would deliver sales of $100,000 with variable costs estimated at $50,000 and fixed costs at $42,250. Required: 1. If divisional performance is based on residual income based on charge for capital of 15%, which division would want to take over the new investment opportunity? Demonstrate this comparing the residual income for each division before and after the investment is made by each division. RI after investment is made $400,000 58% Decision: RI Situation: Office Supplies Ltd has a geographical structure with two divisions aligned with its two markets: Sydney and Brisbane. The following data is provided for the two divisions for the year 2019: Sydney Brisbane Sales Contribution margin ratio Fixed costs $280,000 $190,000 Divisional investments $200,000 $280,000 Common costs for the year totalled $70,000 and were allocated based on sales. RI before investment is made $600,000 52% The management of Office Supplies Ltd faced an investment opportunity, which would require an investment of $50,000 in 2020 and would deliver sales of $100,000 with variable costs estimated at $50,000 and fixed costs at $42,250. Required: 1. If divisional performance is based on residual income based on charge for capital of 15%, which division would want to take over the new investment opportunity? Demonstrate this comparing the residual income for each division before and after the investment is made by each division. RI after investment is made $400,000 58% Decision: RI