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Hello sir. Could you help with my question if possible please?
How do we measure and manage performance in investment centres?
In the course notes for F2, i find in chapter 4, on page 17 this :
“Investment centres:
Ths is like a profit centre except that the manager also has the responsibility for new capital investment (i.e. the purchase of new machines etc.). You will see in a later chapter that more thought needs to be given as to how to measure the performance of a manager of an investment centre.”In which later chapter of the notes or in which lecture do you talk about this? 🙂
Thank you.
The chapter on Divisional Performance Measurement.
However you should only use the Lecture Notes along with the lectures, and you should work through them in chapter order – they are a complete course for F2 covering everything needed to pass well, and it is important that you work through them in order.
Thanks for your response sir.
Actually i am a P5 student 😛 i have passed 13 papers of ACCA but basically have gotten “stuck” badly in P5. This time, however i am planning to give it a very hard go if possible.
I googled investment centres and it brought me back to Opentuition F2 lectures! 😛I am doing all of Sir Gromit’s P5 lectures and revision lectures and notes as well (in order). I have actually done the normal lectures and notes and have just started on the revision ones. Opentuition has been totally awesome! I hope this time, it will take me across the finishing line to passing ACCA. I failed P5 at 49 too once.. lol ugh.
Coming back to the point, it appears ROI and RI are what we use for investment centres. I was just confused by the technicality of the term.. one of the P5 examiner report says
” Future candidates would be advised to consider the impacts that strategic changes such as designation of cost, profit and investment centres would have on the performance management of divisions or departments within a Company”I wasn’t sure what is the difference between just any normal division and a profit and investment centre and hence what impact it would have on performance management/measurement. A cost centre i knew was related only to costs.
I will watch chapter 26 F2 lecture right now 🙂
So… umm a profit centre deals only with sales and costs? And ROI and RI and such can’t be applied there?
Could you possibly elaborate a little on what the examiner report is getting at? especially in the context of changing a profit to an investment centre and vice versa?
Thanks so much
The thing is that divisional managers performance should only be measured on whatever they have control over.
So if it is not an investment centre then it would mean that ‘head office’ was deciding about which new investments to invest in and it would therefore not be fair to either reward the manager because these investments did well,or penalise him because they did badly.
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