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ROI question on study hub

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › ROI question on study hub

  • This topic has 7 replies, 2 voices, and was last updated 1 year ago by LMR1006.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • August 19, 2023 at 3:49 am #690222
    tit1112
    Participant
    • Topics: 17
    • Replies: 34
    • ☆☆

    Can u please help sir.

    Isnardi Co has two divisions, Division A and Division B. Division A has established seven years ago, Division B was established three years ago. The machinery used by the two divisions is identical. Isnardi Co’s board uses Residual Income (RI) and Return on Investment to appraise both divisions, but is concerned that these methods may unduly favour one or other division

    Which of the following statements is correct in relation to measuring the performance of both divisions?

    A. Both methods will favour Division A
    B. Both methods will favour Division B
    C. ROI will favour Division A, RI will favour Division B
    D. RI will favour Division A, ROI will favour Division B

    I got answer C. My reasoning is that as Division A use a machinery established seven years ago, it will have more depreciation and this will lower Capital employed, increasing ROI.
    On the other hand, the RI will decrease.

    And for Division B is the opposite as less depreciation will be charged ROI decrease nd RI increase.

    But the answer is A can u clarify this for me,plase?

    August 19, 2023 at 8:13 am #690228
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1515
    • ☆☆☆☆☆

    Stop doing these questions
    It’s obvious you are doing the same style of questions that won’t help you pass the paper.

    You are thinking of what is wrong rather than just accepting you got it wrong and moving on to the next question or spending far too long analysing the answer.
    I know you want to help your understanding but you are spending too much time on this.

    I will look into it I also believe it’s

    C. ROI will favour Division A, RI will favour Division B

    According to the information provided, ROI measures the profitability of an investment by dividing the divisional profit by the capital invested. Division A, which has been established for seven years, would have a lower book value of machinery due to more depreciation, resulting in a higher ROI for Division A.

    On the other hand, RI is calculated by subtracting a notional interest charge on the capital invested from the divisional profit. Division B, being established three years ago, would have a higher residual income as the machinery’s book value is higher due to less depreciation.

    Therefore, based on the information provided, ROI will favour Division A, while RI will favour Division B.

    August 19, 2023 at 1:39 pm #690258
    tit1112
    Participant
    • Topics: 17
    • Replies: 34
    • ☆☆

    ok thank you sir therefore i should not practice questions on study hub?

    Should I practice only from both kits ?

    August 19, 2023 at 3:46 pm #690262
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1515
    • ☆☆☆☆☆

    You said, I am discouraged after failing my 3rd time for this paper any advice on how to be able to pass this time. I made use of exam performance in my last attempt but still always scoring above 42 but not 50

    I just finished revising Part A,B,C i have started practicing BPP revision kit and Kaplan again for the 4th time

    I’m saying that you should be practicing every type of question. Identify if you lack knowledge.
    You should check your understanding. Do you or can you answer a question in each area of the syllabus?

    Its your 4th attempt
    Have you worked out – perhaps if you are weak on technique or knowledge?
    It’s important to recognise if you’re doing the same again and again.

    From what I’m seeing is that you need to practice Section C questions now as time is of the essence.

    August 20, 2023 at 12:58 am #690293
    tit1112
    Participant
    • Topics: 17
    • Replies: 34
    • ☆☆

    oK thank you, i am actually working on some section C question and started reworking out the mcqs that I got wrong. For me I recognized that it is weak technique as I know the basics but struggling when I have to apply it in a question

    August 20, 2023 at 11:42 am #690324
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1515
    • ☆☆☆☆☆

    Sounds like a plan!
    Can I recommend a few points

    Read the requirement ie the questions before reading from the top, the case story and then read the case. This will give you an insight into what you are looking for.
    Read it at leat two times in full …. The whole question in full

    Then take some time to think what do they want?
    Can you answer it, can you do all of it, some of it and you then need time to think about the rest of it.
    Don’t panic
    Think what you can do well before you start

    If in Section C the question is split into parts a, b and c
    Let us for example say you can answer c best of all… then start with c
    If this question is independent of a and b
    Then do say a and b

    Don’t avoid Section C questions you can score highly in this section
    But you must be able to do Section A and B questions as well

    If your happiest with B start with this section
    If you’re happiest with C start here or A start here…….

    You make the right decision for you

    August 20, 2023 at 5:25 pm #690341
    tit1112
    Participant
    • Topics: 17
    • Replies: 34
    • ☆☆

    Thank you so much for your advice,that means a lot for me.

    Actually, on my 3 last attempts I always got 1 question on section C that I couldn’t work out properly and score at least half that’s why i am focusing on section C for the remaining 2 weeks.

    Last attempt ive got 44 and I left unanswered a question worth 20 marks on relevant costing

    August 20, 2023 at 7:10 pm #690350
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1515
    • ☆☆☆☆☆

    I am glad to help you

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