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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › June 2012 Exam paper question 5
Hi John,
i am having trouble to understand the answer of June 2012 Exam paper question 5- Biscuits and Cakes, question D.
The examiners` answer says:
This calculation shows that, if the investment is undertaken, RI is actually lower than without the investment. So, if either
ROI or RI is considered by Division B’s manager when deciding whether to undertake the investment, the investment will not
be undertaken. This decision will be in the best interests of the company as a whole, since the RI of the investment alone is
actually negative ($132k – $212k = $(80k)).
Could you please explain where the figure $132K comes from ? How is it calculated?
Thank you in advance.
The extra contribution per month is 8.5% x 600,000.
The depreciation per month is 40,000.
This gives extra profit per month of 11,000, or 132,000 per year.