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I have noticed in the Kaplan kit that to calculate RI, sometimes a controllable profit figure is taken, and other times the operating profit.
My questions are:
a) When should we use the controllable profit figure instead of just the operating profit figure?
b) I understand that interest charges should be added back to the controllable profit, but why were IT costs and Central administration costs are added?
Thank you
I figured out the answer to question b, those costs are incurred from the head office thats why they are added back as the division can’t control them.
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