PERFORMANCE MEASUREMENT AND CONTROL

FINANCIAL AND NON FINANCIAL MEASUREMENT

financial performance indicators

y1 y2
gp 40 45
np 10 10

cs 60 55
oe 30 35

pbt 9320000
rax 2800000
pd 160000
6360000
10000000
0.636
Q6
COMPANY INCURS A LOSS OF 37-20 = 17 PER UNIT

PRIOT TO THE OFFER THE COST TO MAKE WAS 20.NOW ITS 37.
FROM THE POV OF ORGANISATION AS A WHOLE.

INTERDIVISION TRANSFER DOESNOT CREATE LOSS OR PROFIT FOR THE COMPANY AS A WHOLE.

SPARE CAPACITY 140000

M RQEUIRED 120000

AS THERE IS SPARE CAPCPAITYY TO FULFILL THE NEED OF DEPARTMENT M.IT SHOIULD BY FROM DEP L.

DIV L DIV M GROUP

EXTERNAL SALES 6400000 11520000 17920000

INTERNAL SALES 4800000 0 0 AS INTRAGROUP SALE…NO INCOME FOR T

OTHER MATERIAL 3360000 2040000 5400000

COMPONENT L 4800000 0 INTRA GROUP COST ..NOT A REAL COST FO
LABOUR 1680000 1080000 2760000
VOH 560000 360000 920000
SD 640000 120000 760000

CONTRIBUTION 4960000 3120000 8080000

FIXED COSTS 500000 200000 700000

PROFIT 4460000 2920000 7380000

C)
IF THE TP DOES NOT CHANGE DEPARTMENT M WILL NOT BUY FROM DEPARTMENT L AS THE PRICE IS GRETAETE THAN THE
IF BOUGHT FROM OUTSIDE A LOSS OF 17 WILL INCUR.

THE TP SHOULD BE SET AT 37.EVEN IF SET AT 36 CPU WILL BE 16 AS THERE WILL BE NO SELLING COSTS.37 WILL BRING IN A

c)
if the transfer price remains unchanged,division m will try to purchase from outside casuing a loss of 17 per unit for the gro
the transfer price should therefore be changed to ensure that the priducts are trasnferred rather than bought out side.A p
a price of 36 would enusre the same level of profits as with the case o external sales as the selling cost will nnot nbe incurr

portable garage co

DIV A DIV B PGC GROUP

EXTERNAL SALES 3000000 27000000 30000000
INTERNAL TRANSFERS 1950000 0 0
4950000 27000000 30000000

ADAPTER 0 1950000 0
MATERIAL COST 1050000 6750000 7800000
LABOUR COST 1400000 5250000 6650000
SELLING COSTS 200000 0 200000
2650000 13950000 14650000

CONTRIBUTION 2300000 13050000 15350000

FIXED COSTS 2200000 5460000 7660000
PROFIT 100000 7590000 7690000

B)
FROM COS PERSPECTIVE
COST IF TRANSFERRED INTERNALLY 7 LOST CONTRIBUTION
COST TO BUY 13

EXTRA COST 6

CONTRIBUTION ON EXTERNAL SALE 7

INHOUSE BOUGHT INHOUSE

COST 7 13 FULL
UNITS 30000 30000
COST SAVED 210000 390000 180000
LOST CONTRIBUTION 210000 BOUGHT

FULL

THERE IS A SPARE CAPACITY OF 150000 UNITS FOR DIVISION A (350-200)ITS BETTER TO PRODUCE 150000 UNIT IN DIVISIIO

TO MEET THE DEMAND AN ADDITIONAL 30000 UNIRS WILL BE NEEDED.

EXTRA COST TO BUY FROM OUTSIDE IS 6(13-7).CONYTRIBUTION LOST PER UNIT IS 7.IF TRANSFERRED INHOUSE ,1 PER UNI
C)
MIN PRICE WILL BE 7+7

QUESTION 4

BUS 75.36
PRIME 70.76
EXPRESS 76.04

C)
EFFICIENCY IS THE MEASURE OF HOW ELL THE RESIRCES ARE USED BY THE ORGANISATION.ONE MEEASURE IS THE NUMBE

EFFECTIVENESS IS THE MEASURE OF WHETHER THE ORGANISATIONS OBJECTIVES ARE ACHIEVED BY THE OUTPUT

financial performane: focuses on what the company must do to increase the value for shareholders

customer: what about the organisation the customers value

innovation: what to do to improve the future values

internal processes: what must we excel at to achieve our objectives

balanced scorecard involves the management provided nformation covering all aspects

question 2
division c division e
sales 3800 8400
vc 1400 3030
2400 5370

fc 275.5 582
2124.5 4788
55.9% 57.0%
op na 13000 24000
cl bal 9000 30000

11000 27000

19.3% 17.7%
imputed interest 1320 3240

804.5 1548

gp would have increased had the depreciation not been charged.As the amount of ep would be considerably high than the
gp wise div e performs better than div c
 FROM DEP L.

GROUP SALE…NO INCOME FOR THE GROUP

OUP COST ..NOT A REAL COST FOR THE GROUP

THE PRICE IS GRETAETE THAN THE SUPPLIER PRICE.

ELLING COSTS.37 WILL BRING IN ADDITIONALK CPU OF 17

ng a loss of 17 per unit for the group.From the point of view of the division m,they will have to incur 40 for tranfser and just 37 for the
d rather than bought out side.A price of 37 can be set as this will make a gain of 17 per unit (37-20)
e selling cost will nnot nbe incurred

RODUCE 150000 UNIT IN DIVISIION A USING THE SPARE CAPACITY AS THERE WILL BE NO CONTRIBUTION FORGONE FOR THE 150000 U

ANSFERRED INHOUSE ,1 PER UNIT LOSSS WILL BE INCURRED

N.ONE MEEASURE IS THE NUMBER OF KILOMETRES TRAVELLED PER BUS IN SERVICE

HIEVED BY THE OUTPUT

uld be considerably high than the div c….its pbit would fall.therfore the roi will fall.this will reuslt in the manager of e not gettig the bnu
ranfser and just 37 for the outside supplier.This will save them a cost of 3 per unit.However this will not be beneficial for the group as
RGONE FOR THE 150000 UNITS,SABING A COST OF 6 EXTRA
ager of e not gettig the bnus and as a result will not agree to invest further in the divison this will affcet thefutur perfrmace of the com
eneficial for the group as awhole as the group loses 17 per unit for each unit puchased from outside
utur perfrmace of the company
a)
cost to buy from supplier 37
csot to make in house 20

if bought loss 17

units requited by divisdion m 120000

spare capcity of division lk 140000

units to b produced by division l 120000

all the units should be produced by the department l as it saves the company from a loss of 17 per unit that would have o

b)
div l div m group
external sales 6400000 11520000 17920000
internal sales 4800000 0 0

component l 4800000
other 3360000 2040000 5400000
labour 1680000 1080000 2760000
voh 560000 360000 920000
selling exp 640000 120000 760000
6240000 8400000 14640000

contribution 4960000 3120000 8080000

fixed costs 500000 200000 700000
profit 4460000 2920000 7380000

question 1
DIV A DIV B GROUP
SALES:EXTERNAL 3000000 27000000 30000000
INTERNAL TRANSFER 1950000 0
4950000 27000000 30000000
COSTS:
AADAPTOR 1950000 0
OTHER MATERIALS 1050000 6750000 7800000
LABOUR COSTS 1400000 5250000 6650000
VARIABLE COCSTS 200000 200000
2650000 13950000 14650000
CONTRIBUTION 2300000 13050000 15350000
FIXED COSTS 2200000 5460000 7660000

100000 7590000 7690000

B)
COST TO BUY 13 COST TO M 7
LOST CONT 7
14
OUT OF THE 180000 REQUIRED 150000 WILL BE TRABSFERRED IN HOUSE AS IT WILL SAVE TH EXTRA COST OF 6 IF PURACH
FOR THE REMAINING UNITS OF 30000 COST IF MADE INHOUSE WILL BE 14 FOR THE COMPANY WWREAS IF PURCHASED IT

C)
AS DIVISION A HAS EXTERNAL SALES THE COST WILL BE LOST CONTRIBUTION ON SALES PLUS THE VARIABLE COSTS
LOST CONTRIBUTION IS 7
VARIABLE COST 7
14

AS THERE IS NO SPARE CAPACITY BEYOND THE 150000 UNITS SUPLIED DIVISION A WILLHAVE TO STOP THE SALE OF SOME

DIV C DIV E
PBIT GIVEN 1455 3950
30% DEP OF ASSETS NOT CONTROL 49.5 138
HEAD OFFICE COSTS 620 700
REVISED PBIT 2124.5 4788

OP NET ASSETS 13000 24000

CL NET ASSETS 9000 30000

AVG 11000 27000

ROI 19.3% 17.7%

THE TARGET ROI WAS18%.DIV C HAS 19.3 AND DIV E HAS 17.7 THERFORE DIV E WOULD BE SEEMED TO NOT HAVE MET TH
THE DIFFERENCE WOULD BE EXPLIANED RO SOME EXTENT BY THE FACT THAT THE DIVI E HAS PURCHASEDSOME ASSETS A

THE MANAGER OF DIVISION E WOULD BE RELUCTANT TO INVEST IN ASSTES IN THE FUTURE AS IT WILL REDUCE THE ROI A

B) DIV C DIV E
PBIT 2124.5 4788
IMPUTED INTEREST 1320 3240
 804.5 1548

BASED ON THE RESULKTS DIV E IS PERFORMING BETTER THABB THE DIV E.HO WMUCH THEY EARN IN EXTRA OF THE COST

ADVANTAGES
1. IF THE INVESTMENT EARNS IN EXCESS OF THE IMPUTED INTEREST IT WILL BE ACCEPTED AND THERFORE DSFUCNTIONA
2. MULTIPLECOST OF CAPITAL CAN BE INCORPOATD INTOI THE CALCUKATION
3.RISK CAN BE INCOPRTED INTO THE CLAUJTION

DIASDV

PROFITS CAN BE ANIPULATED

MAY NOT BE POSSIBLE TO CMPARE AS ITS AN ABSOLUTE FIGURE

q349 biscuits and cakes

division b division c
pbit 3732 3504
net assets 23200 22600
16.09% 15.50%

b)
pbit 3732 3504
capital employed 23200 22600
notional interest 2320 2260
residual income 1412 1244

c)
based on the ROI both divisions have failed to achieve the raget of 20%.This is a fall from the ROI of 22 and 23 for the last
it’s the inclusuion of the head office costs that have casued tha ratios to fall.

also the RI of the divisions are 1412000 and 1244000 respectively which shows that tey have performed well enough to ea

this means that bth divisions have erfoermed really well.

d) workings
contribution 7812 w1:depreciation
controllable fixed costs 2088 cost 2120
controllable profit 3864 scrap 200
useful life 4
net assets 25320 dep 480

15.26%

notional 2532

ri 1332

based on the roi the roi has fallen for the division.therfore the investmemt will not be in the best decision of the company

e)
if ROI is solely used,this will casue dysfunctional behaviour as the managers ma not invest in assets that will meet the targe
they are also likley to hold on to old assets as the dpereciation means the roi will increase.This will increase the repair cos
Also if the rewards are vased on the roi calcukated using net profits rather than controllable profits amangers will be demo
also they may focus in shoirt term rather than the long term profitabulity of the company by manipuating profit figure

q350 hammer co

STEEL 1.684211
OTHER MATERIALS 0.27
LABOUR 2.5
VOH 3.75
DELIVERY CHARGE 0.5
COST 8.704211
MARKUP 2.611263
TRANSFER PRICE 11.31547

B)
VARIABLE COST 8.704211
FOH 3
COST 11.70421
MARKUP 1.170421
12.87463

C)
INCLUDING FIXED COSTS IN TRANSFER PRICE WOULD BE A SENSIBLE POLICY IF THERE WERE NO EXTERNAL CUSTOMERS.IN
THIS WOULD BE REASONABLE AS THE DIVISON WOULD NOT BE ABLE TO COVER THEE FIXED COSTS OTHERIWSE WITH THE
HOWEVER THERE IS A RISK THAT THE TRANSFER PRICE MAYBE HIGHER THAN THOSE IN TH MARKET,WHICH WOULD REWS
THE COMPNAY WOULD BE BETTER OF PURCHASING IT FROM OUTSIDE SUPPLIERS RATHER THAN MANUFACTURING IN HO

D)
THE RETAIL STORES SHOULD BE ALLOWED TO PURCHASE FROM OUTSIDE IF THE PRICES ARE CHEAPER AND IT IMPROVES T
TOTAL COST PER UNIT FOR THE COMPANY WOULD BE 11.70 PER UNIT.IF THEY OFFER COSTS LESS THAN THIS THEY SHOUL

TIES ONLY CO

c)
IN Q1 27631 TIES WERE SOLD.THIS HAS INCREASED TO 38857 TIES IN Q2,AN INCREASE

95% OF TIES IN THE FIREST QUARTER WERE DELIVERED ON TIME COMPARED TO 89% IN
THIS SHOULD BE IMPROVED IN ORDER TO ATTRCT THE CUSTOMNERS .BY REDUCING TH

SALES RETURNS HAVE BEEN 12% IN THE IRST QUAARTER AND 18% IN THE SECOD QUAR
AVERGAE SALE RETURN FOR THE IDUSTRY WAS 13%. IN Q IT WAS DOING BETTER THAN

SYSTEM DOWN TIME HAS INCREEASED BY 50%.THIS ALSO COULD BE AS A RESULT OF IN

CUSTOMERS WIL BE DISSATSIFIED F THE SYSTEM IS DOWN WHEN THEY TRY TO PLACE O

BRIDGEWATER

Q1 Q2 Q3 Q4
SALES 40000 36000 50000 60000 186000
ANNUAL SALES BUDGET 180000

TRAINER COST PER DAY 200 200 200 200

ROOM HIRE COSTS 100 100 100 100

AS PER THE OBJECTIVE SALES SHPULD GROW EACH QUARTER AND THE ANNUAL SALES SHOULD EXCEED THE BUDGET.
HOWEEVR IN THE CASE OF NW DIVISION SALES HAVE FALLEN IN Q2.
AS THE OBJECTIVE WILL BE DEEMED TO HAVE NOT BEEN MET TH CHANCES OR PROMOTION COULD BE DAMAGED
EVEN THOUGH THE EXPECTED SALES ANNUALLY EXCEEDS THE BUDGETD DEMAND

TRAINER COST WAS NOT SUPPOSED TO BE OVER 180 PER ARINING DAY.HOWEVR IN THE CASE OF NW DIVISION THIS HAS

ROOM HIRE COSTS WAS NOT SUPPOSED TO EXCEED 90 PER TEACHING DAY BUT HAS BEEN 100 FOR THE QUARTERS

ANOTHER OBJECTIVE IS TO MEET THE BIFHETED PROFIT ANNUALLY AND QUARTERLY.

NW DIVION HAS FAILED TO DO SO FOR THE LAST 2 QUARTERS EVEN THOUGH THY ARE LILEY TO MEET THEM IN THE NEXT
AS THERE ARE OTHER DIVIOSN TEHR IS A CHANCE THET THEY COULD BE PERFORMING WELL AND EETING LAL OF THE OBJE

AS A RESULT THE CHANCS OF NW DIVION MANAGER BEING PROOTED ARE FAR ;ESS

b
q1 Q2 q3 q4

SALES:
EXISTING 40000 36000 50000 60000
VOUCHERS 2500 2500 2500 2500
SOFTWARE UPGRADE 10000 12000
42500 38500 62500 74500 218000

TRAINERS 8000 7200 12000 14400

DEALYED PAYMENT
ROOM 4000 3600 6000 7200
STFF TR 1500 1500 1000 1000
OTHER COSTS 3000 1700 6000 7000
SOFTWARE COSTS 1800
18300 14000 25000 29600

FORECAST NET PROFIT 24200 24500 37500 44900 131100

C)
the voucher sehme is beneficial as it will increase the sales by 2500 in each quarter
as the customers are all new ther is a chance that they could beratined and further sales may occur in the future.
however this is not enough to meet the targets for the profit and the costs in quarter 1 and 2

software upgrade
the pucrase of the upfrade will incur cost initially and this will bring down the profits but in quaiter 3 and 4 they bring in ad
also extra days will be rqeuired and trainer cost plus the rom hire will need to met
any benfits will be received from q3 and q4 whih is after the pootiondecison ,they can olnly hope for long term perfomce
delaying payment
this is not a good idea as it’s a cometitve marke tand the could lose the trainers.
aldo this will not improve anything other than the cashflow pf the diviin wich is no used to assess the performance of the m

if the proposals were taken together tis willnot improve the chances of success of the manager.
q359 cim co
div f div n

controllable profit 2645 1970 bc using net profit will not b fair as it contiancosts that
capital employed 9280 16840
roi 28.50% 11.70%

both the divisions meet the target of 10%

b)
div f div n
salary 120000 120000
whole percenateg points above 10 18 1

max bonus 36000 36000

bonus 43200 2400

as the maximum bonus payable is 36000 per year dif f ca only receive 36000 and thebinus fir n is 2400

c)
If roi is used to calculte the performce the amanger of divisoion f will get more binus than the manager of div n.
div n seems to be badly performing if just the roi is considered because they have roi of just 11.7 which is just above rhe ta
however when the net profit ratio s comapred div n is performing better than divison f suggesting that they control the co

the roi is worde for divion n as they have made an investment of 6.8m wihich will increae the productivity by 8% each year
this increases th e capital employed which will reduce the roi.

div fs manager has refused to make investments in cimputer systems depte them being very old.they have a better cash p
also delaying the payavles will reduce the catal eployed which will increase the roi.
delaying payables could affect the supplier goodwill
the manger of divison f is focusing on short term at the expense of long term leading to dysfuntional decioson making.
div f also has lower non current assets than the ficjion n

d)
cim co should link the manager rewards to shares as this will align the interest of the managers with that of the company a
when objectives are set they should incude long term objectives plsu short erm objectives
measurement of performance should not be on the basis if financial aspects only as it will make them think in the short ter
Q361
W CO
D G C CO
ROCE 25.5% 12.0% 8.4%
ASSET TURNOVER(SALES/CAPITAL 0.61 0.79 0.19
OPERATING PROFIT MARGIN(NET P 41.96% 15.18% 45.05%

ROCE
D HAS AN ROCE OF 25.5% G HAS 12% AND C HAS 8.4%

C CO APPERS TO PE PERFORMING PORRLY BECAUSE OF ITS HUGE CAPITAL EMPLOYED.It is not beinging in sales in proporti
and would have made a loss of 540000

sales turnover
dsign div has a turover of 0.61 times g has 0.9 and c has 0.19
this is due to te fact that the ca[pital employed by the co is high which is expected of the divison as its manufactures comp
also a large oriprtion of its sales come from intrnl sales without wihic t wold have made a loss

gearbox apperas to be using its assets well than ost of the divison as it has an ato of 0.79 times even with a gretaer capital

operatingratio
c co apperas to be controlling its admin and distributon costs very weel as it has on op ratio of 45.05% .as its major proptio

design divison co has op margin of 42%.bceuase of the higher gross profit margin and also die ti te fact that the donot incu

gearbox divison
has op ratio of 15.18%.its distribution costs isdoybl thato fthe c co.
its expetd as it sell externally and is a mafacturing co
if the cost of sales exluded the internal transfer op would gave improcede

roce
design has less assets employed as revenue is earned from making design rather than manufacturing products

ato

b)
sales demand for c co 13350 maximum price of
lost sales 5340 7173
vc 2136
lost contribution 3204

variable costs 3020

transfer price 6224

price offered to gear box 7172.5

as the c co has no psare capcity,it it were toi supply goods to internal div it will lose external sales.this needs to be reimbur
total sales demand for the products of c co is 13350000 (8010000/60%) as its been given that 40% of the demand has not
therfore the lost sales would be 40% of the total sales i.e 5340000.Its reevnat variable cost would be 2136000(40%*53400
this wil provide the lost contribution which is lost sales less its variavle costs 3204000.

the demnad from gearbox divion is fro 7550000.the variable cost for prodiing this is 40%*7550000 which gives 3020000.

therfore the total minium transfer price should be 6224000(3204000+3020000)

the gerabox div has been ofeered aprice at 5% to what it currently buys at.this gives a price of 7172500(95%*7550000)
this will be the maximum the garbox divion is willing to pay

the optium trasnfer pricing should be between the 6224 and 7172.5 and this should be negotiated by the managers of the

full capacity 15560

total ext dem 13350

met 8010 7550
lost 5340
2210

363 peoples bank

a)
the balanced scorecard approach requires information to be provided on all four scorecards and includes financial and non
focusing on just financia measures will not give the full picture of the business as it could be maniupluated or short ter, gai
non financial measures are indiactive of future financial performance.
by looking at the different perspectives planning and control will be improved as all four scorecards must be balanced.

the pople bank co want to giv back t scirty .this can be incoproted into the performance measuremt oi understand whethe
it will also helpt o inderand I fthe customers prefenrece iscanging or wtwehr the shareholders are unsatisfied or whetehr t
this will help them in assessing whether they will be uceesfull in the long term.
b)

financial
the target roce fo rthe bank was 12% wheres the actual is 11%.this is not a great deviation howevr they must investigate t
they were able to exceed the budgeted net interest income by 0.5m which is a good thing.
they have again failed to achieve the net iteets margin howver in thic case to ints a minor variation from the target
the amount lend to smes arget havenot been met.deviated by 11.1%

the bak aperas to be doing well in almost all of the aspects except the lending to smes
latjough they have slighly deviated from the target

customer
the cos vison was to prvide suport to new homeowenrs an the target was 80000 fiest time buyers.however they have exce
they had expected 2 complaints per 1000 customers howevr actual resul was 1.5 per thousand which indoacted that tey a

in their vison to help the diavle they wanted tio insatll 100 cashpoints and in rality 120 have been installed.and traget has b

noo of wheelachai ramps hasv elso been met the traget

overall they are performing really well and their customer are valuing them

internal processes
they have managed to simplify 110 busines processes to ease the access to cstomers.exceeding the target by 10
it was their vison to do do
in case of new services made avilable thru mobile banking they have only added 2 irrespective of the tragt eset as 5.

incidences of fraud per 100 customer in actaul was 3 comapred to the target of 10
they have faled to reach the raget for carbon emisison anexceeded by 30000

they should improve their process in provinmdnew saervices

they should take care of the carbon emmisn if targets are to be achieved

learning and growth

they have failed to achieve their target of 154000 being taned and in actualityon 1300 a deviation by 200
they have exceeded the hours to support community projects
in the posin from da areas tey have come so lose to the target
they have suported 250 more org than targeted

q367

to make long term profits

b)
balances score card method enables the hammock to measure the non finacial as well as financial performce .tradiotionalm
as blance screcard focuses on both this can be avoided.

hammock wants to create customer value .there is no way of measuring this through fnaal terms/
as nonfinnaicl performace is also measured this will help the hammock to acgeive the objective o fprfitabiity in the long te

2
process
goal provide better room services and appliances to customers
as there has been a review that the room did not have professional body dryers
aionised water taps and hairare equipmets

no of calls to the reception

no of customer complaints

innovation and learingn

goal invent new dishes that are unique and appealing to customers
its beewn reviewed that the menu had not been changed when the customer visited m

no of new dishes in the period

a)
LOG TERM PROFITS
AVG NUMBER OF GUESTS PER WEEK LAS T YER WAS 1940 THIS HAS INCREASED BY 20 THIS EAR.THIS OCULD BE AGOOD SI

AVERAGE REVENUE PER WEEK HAS INCREASED BY JUST 1 PERENAGE.

woodside co budgeted actual variance

funds 700000 620000

free meals 91250 104000 -12750 a

shelter 250000 223380 26620 f
advice 45000 61600 -16600 a
campaigning and advertising 150000 165000 -15000 a
fixed costs 65000 83000 -18000 a

surplus/shortfall 98750 -16980 -35730

budgeted surplus 98750

funding shortfall -80000

price variance std price actual pric aq

free meals 5 5.2 20000 -4000 a
shelter 25 25.5 8760 -4380 f
advice 15 17.6 3500 -9100 f
campaigning and advert 150000 165000 -15000 f

usage variance std actual std price

free meals 18250 20000 5 -8750 a
shelter 10000 8760 25 31000 f
advice 3000 3500 15 -7500 a

budgeted foh
foh variance -18000

-16980
unit that would have occurred had the company purchased from outside
 A COST OF 6 IF PURACHASED FRO OISTIDE SUPPLIER.
WREAS IF PURCHASED IT WILL BE 13.THERFORE THOSE UNITS ILL BETTER BE PURCHASED FROM OUTSIDEAS IT WILL MAXMISE THE PRO

VARIABLE COSTS

TOP THE SALE OF SOME GOOD TO ECTERNAL CSTOMERS IN ORDERT OACCOMADARE THE SALE TO DIVISIN B

D TO NOT HAVE MET THE TARGET

CHASEDSOME ASSETS AND ITS DEPRECIATION WOULD HAVE CASUED THE PBIT TOI FALL.ALSO THE INCREASED AMOUNT OF ASSETS W

WILL REDUCE THE ROI AND HENCE HIS BONUS AS WELL.HOLDING ON TO OLD ASSETS WILL ROI INCREASING
IN EXTRA OF THE COST OF CAPITAL

ERFORE DSFUCNTIONAL BEHAVIOUR IS ELIMINATED

f 22 and 23 for the last months.if the head apportionment costs are not included as they are not controllable by the divisions,div a will

rmed well enough to earn above the notional cost of capital.This would have increased 3272000 and 3404000 respectively if the head
ecision of the company

that will meet the targets of the company but will bring down the roi of the division.This may cost the omany in the short term.
increase the repair costs in the future and the profitability will fall as a result.
s amangers will be demotiated as the head offcice costs cannot be controlled by them and they will feel like unfairly assessed.Even if th
puating profit figure

TERNAL CUSTOMERS.IN THIS CASE WE HAVE BEEN GIVEN NO INDICATION AS TO WHETHER THERE HAS BEEN ANY EXTERNAL CUSTOM
 OTHERIWSE WITH THE CONTRIBUTION FROM THE EXTERNAL CUSTOMERS
T,WHICH WOULD REWSUL TIN THE RETAIL STORES BEING DISSATISFIED AMD DEOTIBATDAS IT WILL FACFET THEIR PROFITABUKLTIY
MANUFACTURING IN HOUSE

PER AND IT IMPROVES THE PROFITABILITY OF THE HAMMER COMPANY RATHER THAN JUST THE RETAIL STORES.
THAN THIS THEY SHOULD BE ABLE TO BU THE SUPPLY

ES IN Q2,AN INCREASE OF 40% FROM THE FIRST QUARTER.THIS IS A SIGN OF BUSINESS GROWTH.

E COMPARED TO 89% IN THE SECOND QUARTER,WHICH IS AFALL OF 6%.THIS COULD BE AS A RESULT OF THE INCREASED SALES AND T
MNERS .BY REDUCING THE PROCESSING TIME OR IDETIFYING ANY ISSUES WITH STOC.

8% IN THE SECOD QUARTER.THIS HAS INCREASED BY 50% SOME OF TIS COULD BE EXPALINED BYTHE INCEREASE IN NUMBER OF TIES B
AS DOING BETTER THAN MOST OF THE INDUSTRY.HOWEVER INQ2 IT IS PEFORMING BADLY

D BE AS A RESULT OF INCREASE I SALES GROWTH AS MORE CUSTOMERS MAY BE FLOCKING TO THE WEBSITE RESULTING DOWNTIME
EN THEY TRY TO PLACE ORDERS.

XCEED THE BUDGET.

D BE DAMAGED

NW DIVISION THIS HAS BEEN 200 PER DAY FRO THE PAST TWO QUARTERS.

R THE QUARTERS

EET THEM IN THE NEXT TWO QUARTERS AND ANNUALLY.

EETING LAL OF THE OBJECTIVES COMPARED TO THE NW DIVON WHICH MEETS JUST 2 OF THE 6 TARGETS

r in the future.

3 and 4 they bring in adiitional sales of 10000 and 12000

or long term perfomce

he performance of the manager

r as it contiancosts that are under the cotrol of the manager

ager of div n.
hich is just above rhe target of 10 and div f performing brillianlty as it has roi of 28.5%
that they control the costs better than div f.

uctivity by 8% each year.

ey have a better cash position than divion n.the manager is trying to boost his performance so that hi bonus wont be affected

al decioson making.

h that of the company and will forec them to think in the long term

em think in the short term

nging in sales in proportion to the capital employed.if the internal sales were to be excluded the ratio would have become weak.

s its manufactures components for gearboxes

n with a gretaer capital employed tan design

05% .as its major proption of sales are internal it has less distriguin costs

fact that the donot incur distribution costs as they design rather than deliver products

ng products
 his needs to be reimbursed along with the cost of proudction
of the demand has not been satsfed
be 2136000(40%*5340000)

which gives 3020000.

2500(95%*7550000)

by the managers of the dividions

cludes financial and nonfinancial measures

pluated or short ter, gain oculs be made at the expense of longterm gains

s must be balanced.

mt oi understand whether they are being achieved

unsatisfied or whetehr there are any processes they should excel at
r they must investigate this as shareholders could be dissatisfied.

from the target

however they have exceeded this by 6000 and therfore has met their target
ich indoacted that tey are peforming better and customers are overall satsified with theornservice

nstalled.and traget has been maet as a result

e target by 10

he tragt eset as 5.

performce .tradiotionalm ethod would have focused onl on the financial performace.financial performance doesnot really shw the full
prfitabiity in the long term.

onal body dryers

the customer visited multiple times

IS OCULD BE AGOOD SIGN AS ITS JUST 10 WEKS INTO 2017.THE NUMBERS MAY INCREASE FURTHER AS MONTHS GO ON.
T WILL MAXMISE THE PROFITS

ED AMOUNT OF ASSETS WOULD ICREASE THE CAPITAL AMOUNT BY THE CARRYING VALUE
e by the divisions,div a will have a ROI of 24%(466000/23200000*100) and div c will have a roi of 25.6%(472000*12/22600000*100).W

00 respectively if the head office cost had not been included.

ny in the short term.

unfairly assessed.Even if they have improved the performanceof the divisdion the head ofoice costs may decline th eoverall profitabilit

N ANY EXTERNAL CUSTOMERS

THEIR PROFITABUKLTIY

E INCREASED SALES AND THE WAREHOUSE DEPT BEING PRESSED ON RESOURCES.

EASE IN NUMBER OF TIES BEING SOLD.FURTHER THE QUALIT OF THE IMPORTED TIES SHOULD BE ASSESSED,IF ITS OFF POOR QUALITY O

E RESULTING DOWNTIME.HOWVER AS TEY HAVE HEABILT INVESTED IN TO PREVENT THIS THIS MSUT B EINVESTIGATED.
wont be affected
have become weak.
doesnot really shw the full picture of the organisation.they can be maniupkated and reuslt in shiort termisn.
NTHS GO ON.
000*12/22600000*100).Which menas that they have performed ver well.
cline th eoverall profitability
F ITS OFF POOR QUALITY OR DAMAGED CUSTOMERS WILL RETURN AND IT WILL AFFECT THE REPUATION OF THE COMPANY AS WELL

VESTIGATED.
F THE COMPANY AS WELL