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Investments that are controlled by the division (i.e. decided on by the division) as opposed to forced by head office.
How you figure it out depends on the wording of the question.
for instance, a theme park which had a restaurant is managed by independent contractor and make all decisions of the running of the restaurant. the total assets are 6 million which include non current assets of 4 million of which 1 million is the restaurants. the restaurant is under direct control the restaurants manager.
would the controllable investment be 5 million. (6 million minus 1 million)?The question as you have typed it does not really make sense. If the independent contractor makes all the decisions about the running of the restaurant then it cannot be said to be under the direct control of the restaurant manager!!
If you are referring to a past exam question then say which one so that I can explain the wording.
what im trying to figure out is what is a controllable investment in terms of total assets.
if the independent contractor makes all decisions for the running of the restaurant (as they are in control of the restaurant) will their assets be part of the controllable investment for the theme park? which all assets total to 6 million. (1 million restaurant and 5 million theme park).
The question as you have typed it makes no sense. Whether assets are controllable or not is relevant when measuring the performance of a division. Whose performance is being measured? Who employs the restaurant manager?
If this is a question in the BPP Revision Kit than say which question then I can check the wording myself.I assume that you have watched all my free lectures on performance measurement?
The independent contractor employs the restaurant manager. its not about the performance measurement. id like to know if the theme parks controllable investment would be 5 million or 6 million of which the 1 million is the restaurants.
But whether investments are controllable or uncontrollable is only relevant when considering performance measurement.
I have watched your lectures on performance measurement but It doesn’t talk about controllable investment. if the theme park has assets of 6 million (2 million is non currents assets and 1 million is the restaurants).
so my understanding is – 3 million is the theme parks assets, 2 million is current assets for the theme park and 1 million is the restaurants.
the restaurant is run by an independent contractors. which is managed by head office and the independent contractors are paid a management fee.
will the controllable investment be 3 million of the theme park assets.
As I wrote before, it is only relevant when considering divisional performance and controllable profits and assets are certainly mentioned in my lectures.
I cannot add to what I have already written without seeing the full details of the question. If it is a past exam question or a question in the BPP Revision Kit, then please tell me which one.
Which lecture can I watch to help me with controllable investments (in regards to total assets)
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