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I do have a problem that how the ROCE in both division is same?
Question#1
Division X:
Revenue = 50,000
Operating costs = 20500
Fixed cost = 11000
Profit = 18,500
Capital employed = 150,000Division Y:
Revenue = 40,000
Operating costs = 18000
Fixed cost = 12000
Profit = 10,000
Capital employed = 100,000Half of the Fixed costs for each division are allocated to head office expenses.
Given that half of the fixed costs are head office expenses, they are not controllable by the divisions.
Therefore the controllable profit in division X is 18,500 + 5,500 = 24,000, and the ROCE is therefore 24,000/150,000 = 16%.
For division Y, the controllable profit is 10,000 + 6,000 = 16,000, and the ROCE is 16,000/100,000 = 16%.
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