The director of Donny Co. is reviewing the performance of its division.
The following information is available for the year ending 31 March 20X9 for its South division.

South division operates in the food retail industry. The total food retail industry sales for the year ending 31 March 20X9 were $1,250,000.
(a) Calculate the following performance measures for South division:
(i) Return on investment;
(ii) Return on sales (to one decimal place);
(iii) Asset turnover (to nearest whole number);
(iv) Residual income (using an imputed charge of 12 per cent per annum);
(v) Market share.

(b) Is each of the following an advantage of residual income as a measure of divisional performance over each return on investment?
(i) It ensures that managers will select projects with positive net present values (NPV).
(ii) It gives an absolute measure of performance.
(iii) It helps in comparing performance of the managers of divisions of different sizes.
(iv) It makes divisional managers aware of the cost of financing their divisions.
(v) It relates the size of the division’s income to the size of the investment.
(vi) It avoids short term dysfunctional decision-making.
(vii) It is more easily understood by divisional managers.
(viii) It is directly related to net present value (NPV).

(c) Which TWO of the following are non-financial indicators that can be used to measure performance?
(i) Defects per product per month
(ii) Non-productive hours per month
(iii) Return per machine per month
(iv) Profit per product per month

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Sales Operating profit Capital employed South division ($) 50,000 700 3,500