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Hi My Dear Tutor,I have a question relating to 2017 sep/dec question.
a)1
Controllable profit
Division—————————–C————————–E
net profit————————1455—————————3950
add back depreciation
on non-controllable asset—-49.5————————————-138
Add back head office costs—-620———————————-700
controllable profit—————–2124.5——————————4788Why add back depreciation on non-controllable assets?because 30% of the depreciation costs in each division relates to assets controlled but now owned by HEAD office?if it is controlled by each division why add back depreciation on non-controllable assets and if it is asked to calculate each division controllable profit and if it says depreciation is controlled by each division why it is still non-controllable?
Average divisional net assets
opening net assets–13000———————————24000
closing assets————-9000—————————–30000
Average assets————11000————————–27000Both opening and closing assets have been given in the question but i did not get how average asset figures derived from?
Really need explanation.
Hi My Dear Tutor,I have a question relating to 2017 sep/dec question.
a)1
Controllable profit
Division—————————–C————————–E
net profit————————1455—————————3950
add back depreciation
on non-controllable asset—-49.5————————————-138
Add back head office costs—-620———————————-700
controllable profit—————–2124.5——————————4788Why add back depreciation on non-controllable assets?because 30% of the depreciation costs in each division relates to assets controlled but NOT owned by HEAD office?if it is controlled by each division why add back depreciation on non-controllable assets and if it is asked to calculate each division controllable profit and if it says depreciation is controlled by each division why it is still non-controllable?
Average divisional net assets
opening net assets–13000———————————24000
closing assets————-9000—————————–30000
Average assets————11000————————–27000Both opening and closing assets have been given in the question but i did not get how average asset figures derived from?
Really need explanation.
You calculate the average in the same way as we always calculate averages.
Add together the opening and closing figures, and then divide by 2.
To get controllable profit, we should only use costs that are controlled by the division – who actually owns them is irrelevant.
The question specifically refers to assets controlled by head office, and the depreciation on these assets should be added back because it is not controlled by the division.
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