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ROCe

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › ROCe

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • November 3, 2021 at 2:36 pm #639847
    Anonymous
    Inactive
    • Topics: 44
    • Replies: 26
    • ☆☆

    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 = 150,000

    Division Y:
    Revenue = 40,000
    Operating costs = 18000
    Fixed cost = 12000
    Profit = 10,000
    Capital employed = 100,000

    Half of the Fixed costs for each division are allocated to head office expenses.

    November 3, 2021 at 3:33 pm #639861
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51563
    • ☆☆☆☆☆

    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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