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The kaplan book says controllable profit is after depreciation but before tax.
A SOFP had:
– operating profit $500,000
– profit before tax $180,0001. Q> Why is the controllable profit the operating profit and not the profit before tax?
2. Also what is a controllable profit?
If it’s after depreciation shouldn’t it be net profit because depreciation is calculated at the end of the year??Please help
This is really basic financial accounts!
The operation profit is the profit before interest and tax. The division does not control interest or tax which is why we use the operating profit.
Depreciation is always an expense in arriving at the operating profit. Whether or not it is relevant when measuring the division depends on whether the division controls purchases of non-current assets or not.
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