- This topic has 1 reply, 2 voices, and was last updated 9 months ago by
John Moffat.
John Moffat.Viewing 2 posts - 1 through 2 (of 2 total)
-
Posts
-
Anonymous
- 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 = 150,000Division 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.
John Moffat
- Topics: 57
- Replies: 49927
- ☆☆☆☆☆
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%.
John MoffatViewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.