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Residual income calculation

GGureen3y ago
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
GGureen3y ago#1
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.
John MoffatJohn MoffatTutor3y ago#2
That is correct :-)
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