Performance Measurement

A and B are two divisions of a large company that operate in similar markets. The divisions are treated as investment centers and every month they each prepare an operating statement to be submitted to the parent company. Operating statements for these two divisions for October are shown below:

Operating statements for October
A
B

‘000
‘000
Sales revenue
900
555
Less variable costs
345
312
Contribution
555
243
Less controllable fixed costs (includes depreciation on divisional assets)
98
42.
Controllable income
460
201
Less apportioned central costs:
338
180
Net Income before tax
122
21

Total divisional net assets
$9.76m
$1.26m

The company currently has a target return on capital of 12% per annum. However, the company believes its cost of capital is likely to rise and is considering increasing the target return on capital. At present the performance of each division and the divisional management are assessed primarily on the basis of Return on investment (ROI).

Required:

(a)
Calculate the annualized Return on investment (ROI) for divisions A and B
(b)
Calculate the annualized Residual Income (RI) for divisions A and B.

Hello, John, I am sorry that asking my personal tutor question here but I can have only you for my solutions. Please help me in this. Actually, I took Controllable Income in my calculations as I thought it would be more relevant to evaluate performance of divisional managers. My tutor said it is wrong, it is better to take Total Net Income as the question has not asked anything like controllable or uncontrollable. I am not much convinced with this reason.
Can you tell we what is correct to do here? Thank you.