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Question 4-Performance Measurement (8 marks] The president feels very strongly that Mountain Sports should expand operations to a second location. She has even found a prime location in Canmore, Alberta, One of the great things about Canmore is its proximity to the mountains, and its only about 10 minutes away from this beautiful, vibrant and internationally known Banff tourist town. Research indicates that the Canmore market is well suited to both cross-country skis and bikes that competition is fairly limited. The investment in assets (cash, inventory, equipment) required for the new location is $ 162,000 16% Minimum required retum on investments Actual 2019 return on investment of the original location 20% Management has provided the following income statement to the bank manager the expected net income in the Static Budget % Amount Sales in Units 4,200 1 Sales 525,000 100% 2 Less: Variable Costs: 3 Cost of Goods Sold 225,000 43% 4 Sales Commissions 78,750 15% 5 Total Variable Costs 303,750 58% 221,250 42% 6 Contribution Margin 7 Less: Fixed Costs: 8 Advertising 21,000 Property Taxes 9,000 0 Rent 54,000 1 Salaries & Wages 113,000 2 Total Fixed Costs 197,000 3 Net Operating Income. 24.250 4 5 Part A: (4 marks) Calculate the following performance measurements for the proposed Canmore expansion: 6 Margin (see Chapter 11 notes) 7 8 Tumover (use investment in assets in equation) 29 30 Return on Investment 1 2 Residual Income 3 4 Part B: Analysis (4 marks) Explain in your own words using case data. Marks will not be awarded for textbook definitions). a. If management is evaluated based on ROI, will the project be accepted (expansion into Canmore)? Why or why 35 not? 9