Mega Boxes Inc. expects its divisions to earn a minimum rate of return of 15%. One of its divisions, Cube Storage, is an investment centre that manufactures storage containers. The division has average operating assets of $2,500,000 and achieved the following results in the current year: Cube Storage

Income Statement

Sales		$4,800,000
Cost of goods sold		3,160,000
Gross Margin		1,640,000
Operating expenses:
Administrative	$428,000
Selling	720,000	1,148,000
Operating income		$492,000

Required: a) Calculate the margin and turnover for Cube Storage division for the current year. Show your work for full marks. (2 marks) b) Calculate the return on investment for Cube Storage division for the current year. Show your work for full marks. (1 mark) c) Calculate the residual income for Cube Storage division for the current year. Show your work for full marks. (2 marks) d) An investment opportunity is available to Cube Storage that would require an investment of $500,000 in new operating assets and earn net income of $85,000. i) Would the management of Cube Storage likely accept the investment opportunity if they are evaluated based on return on investment of the division? Explain well for full marks. (2 marks) ii) Would the management of Cube Storage likely accept the investment opportunity if they are evaluated based on residual income? Explain well for full marks. (2 marks)