Question Tag: Residual Income

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  • 15 Marks

PM – Nov 2024 – L2 – Q7b – Divisional Performance Measurement

Evaluating division performance using ROI and residual income methods with adjusted cost of capital.

Ngerige and Sons Limited has four operating divisions spread across four cities in Nigeria: Lagos, Kano, Gombe, and Enugu. These divisions are treated as investment centres for performance reporting purposes. The following information is available:

Particulars Lagos Kano Gombe Enugu
Divisional Investment (N) 10,000,000 4,000,000 3,000,000 7,000,000
Divisional Sales (N) 53,000,000 23,000,000 24,600,000 29,400,000
Divisional Variable Costs (N) 50,000,000 22,000,000 23,400,000 27,400,000
Specific Fixed Costs (N) 1,500,000 750,000 600,000 800,000

The company’s annual general fixed cost is N1,300,000, apportioned to divisions based on sales. The cost of capital for Ngerige and Sons Limited is 7.5%. Ignore taxation.

Required:

i. Evaluate the performance of the divisions using the following methods:

  • ROI method. (3 Marks)
  • Residual Income Method. (3 Marks)

ii. Re-evaluate the residual income situation for the company given an adjusted cost of capital of 10%. (3 Marks)

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  • 6 Marks

PM – Nov 2024 – L2 – Q7a – Divisional Performance Measurement

Definitions of Responsibility Accounting, Investment Centre, Return on Investment (ROI), and Residual Income.

Define the following concepts:

i. Responsibility accounting
ii. An investment centre
iii. Return on Investment (ROI)
iv. Residual income

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  • 16 Marks

PM – Nov 2024 – L2 – Q6 – Divisional Performance Measurement

Comparative analysis of Owerri and Isiekenesi event centers based on financial performance metrics

Omegboje and company is a medium-scale outfit that specializes in the rental business in Owerri and Isiekenesi towns. The company operates a large event center in each city, supplying chairs, tables, and canopies for both outdoor and some indoor events.

Each event center manager has some independence in operations and earns a performance bonus of 10% of sales if they achieve more than the standard return on capital employed (ROCE) of 50%.

The following financial data is available for the two centers for the years ending December 31, 2020, and 2019:

Additional Information:

  1. Revenue is derived from rentals and ancillary services.
  2. Both centers have a cost of capital of 15%.
  3. Ignore taxation and inflation.

Required:

a. Discuss the relative performance of the two centers based on: i. Return on Capital Employed (ROCE) ii. Residual Income iii. Profit Margin iv. Current Ratio v. Quick Ratio vi. Gearing Ratio vii. Interest Cover
(7 Marks)

b. Compute the performance bonus for the centers (if any), showing your workings.
(4 Marks)

c. Briefly outline the role of a Management Accountant in project management.
(4 Marks)

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  • 15 Marks

PM – May 2015 – L2 – SB – Q5 – Balanced Scorecard

Evaluate the use of the Balanced Scorecard and analyze investment decisions for Carossi Limited using ROI and RI.

CAROSSI Limited makes quality wooden products such as tables, chairs, benches, and doors. Historically, the company has used mainly financial performance measures to assess the performance of the company as a whole. The company’s Chief Executive Officer has just been informed of the ‘Balanced Scorecard Approach’ and is eager to learn more.

CAROSSI Limited has two Divisions X and Y, each with its own cost and revenue streams. Each Division is managed by a divisional manager who has the power to make all investment decisions within the Division. The cost of capital for both Divisions is 15 percent. Historically, investment decisions have been made by calculating the Return on Investment (ROI) of any opportunities, and presently, the return on investment of each Division is 18 percent.

A recently appointed manager for Division X strongly feels that using Residual Income (RI) to make investment decisions would result in better ‘goal congruence’ throughout the organisation.

Investment Details for Each Division:

Division X Division Y
Capital required for investment (₦m) 88.2 46.0
Revenue generated from investment (₦m) 46.4 28.1
Net profit margin (%) 30 35

The company is seeking to maximise shareholders’ wealth.

Required: a. Describe the Balanced Scorecard Approach to performance measurement. (8 Marks)
b. Determine both the return on investment and residual income of the new investment for each of the two divisions. Comment on these results and take into consideration the manager’s views about residual income. (7 Marks)

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  • 20 Marks

FM – May 2015 – L2 – SB – Q3 – Cost-Volume-Profit (CVP) Analysis

Evaluate Pakex's investment proposal using Residual Income and ROCE, including alternative proposal analysis for decision-making.

Pakex is a division of an automobile group that has five years remaining on a leased premises in which it sells self-assembled motorcycles. The management is proposing an investment of ₦48 million on immediate improvements to the interior of the premises in order to stimulate sales by creating a more effective selling environment. The following information is available:

(i) The expected increase in revenue following the improvements is ₦40 million per annum. The average contribution to sales ratio is expected to be 40%.

(ii) The cost of capital is 16% and the division has a target Return on Capital Employed of 20% based on the net book value of the investment at the beginning of the year.

(iii) At the end of the five-year period, the premises improvements will have a NIL residual value.

(iv) The management staff turnover at Pakex division is high. The division’s investment decisions and management performance measurement are currently based on the figures for the first year of the proposal.

In addition to the above information, there is an alternative proposal that suggests a forecast of the increase in revenue per annum from the premises improvements as follows:

Year 1 2 3 4 5
Increase in Revenue 56 40 40 24 16

All other factors are expected to remain the same.

Required: a. Prepare a summary of the statement of the management’s investment proposal for years 1 to 5 showing Residual Income and Return on Capital Employed for each year using the straight-line depreciation method. (10 Marks)
b. Comment on the use of the figures from the Statement in (a) above as a decision-making and management performance measure. (4 Marks)
c. Calculate the Residual Income and Return on Capital Employed for year 1 using the alternative proposal. (6 Marks)

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  • 30 Marks

PM – Nov 2014 – L2 – Q1 – Divisional Performance Measurement

Analyze transfer pricing impact on divisional performance and group profitability with tax implications for cross-border divisions.

Naijax Group Limited has been in operation since 1980, playing a leading role in the automobile industry.

Division “X,” which is part of the group, manufactures only “265 by 16’’ Rim tyre, which it sells to external customers and also to Division “Y,” another member of the group. Naijax Group’s policy is that:

  • Divisions have the freedom to set transfer prices and choose their suppliers.
  • It uses Residual Income (RI) for performance appraisals.
  • The group’s cost of capital is 12% per annum.

The two divisions’ operating data are as follows:

Division X
Budgeted information for the coming year:
Maximum capacity 150,000 tyres
External sales 110,000 tyres
External selling price N35,000 per tyre
Variable cost N22,000 per tyre
Fixed costs N1,080,000,000
Capital employed N3,200,000,000
Target residual income N180,000,000

Division Y has found two other companies willing to supply tyres:

  • Adex Limited could supply at N28,000 per tyre, but only for annual orders in excess of 50,000 tyres.
  • Banaxa Limited could supply at N33,000 per tyre for any quantity ordered.

Required:

(a) If Division Y provisionally requests a quotation for 60,000 tyres from Division X for the coming year:

i. Determine the transfer price per tyre that Division X should quote in order to meet its residual income target. (9 Marks)

ii. Calculate the TWO prices that Division X would have to quote to Division Y if it becomes the group’s policy to quote transfer prices based on opportunity costs. (2 Marks)

(b) Evaluate the impact of the group’s current and proposed policies on the profits of Divisions X and Y and on group profit. (4 Marks)

c. Assume that Divisions X and Y are based in different countries and consequently pay taxes at different rates: Division X at 55% and Division Y at 25%. If Division X has now quoted a transfer price of N30,000 per tyre for 60,000 tyres, you are required to determine whether it is better for the group if Division Y purchases
60,000 tyres from Division X or from Adex Limited. (15 Marks)

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  • 15 Marks

PM – May 2024 – L2 – SC – Q5 – Divisional Performance Measurement

Calculation of transfer prices and performance appraisal in a holding company.

Zona Tango (ZT) plc is a holding company with four divisions, including Alba and Beta Divisions. Alba Division produces a component that it sells externally, and can also transfer to other divisions within the group.

Beta Division uses the components from Alba Division as a raw material for its final product. The division can also obtain the components from external suppliers. The components, when obtained from Alba Division, undergo further processing at a cost of ₦4.50 per unit before they are sold to the external market.

The Board of Directors, in order to implement a new Appraisal Review, has set up a performance scheme for the divisional managers. A performance target for the next financial year has been set, and the following budgeted information relating to the two divisions has been prepared:

Beta Division has asked Alba Division to quote a transfer price for units of the components.

Required:
a. Calculate the transfer price per unit which Alba Division should quote to Beta Division in order that its budgeted residual income target will be achieved. (3 Marks)
b. Calculate the selling price per unit which Beta Division should quote to the external market in order that its budgeted residual income target will be achieved, based on the transfer price quotation. State clearly your assumptions. (3 Marks)
c. Explain why the transfer price calculated in (a) may lead to sub-optimal decision-making from the point of view of ZT plc, taken as a whole. (5 Marks)
d. In what circumstances will a negotiated transfer price be used instead of a market-based price? (4 Marks)

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  • 20 Marks

PM – Nov 2019 – L2 – Q3 – Pricing Decisions

Evaluate divisional and company profit, ROI, and RI for Rinc Nigeria Ltd.

Rinc Nigeria Limited has two divisions, A and B. Division A specializes in the manufacture of a special part of a product while Division B completes the production and sells the final product. Division A also sells its components to third parties, and Division B can buy parts from external suppliers. Both divisions are profit centers.

The following are for the month of November:

Required:
a. Calculate the profit made by each division and the company as a whole for November. (10 Marks)
b. Calculate the ROI and RI of the divisions and the company. (5 Marks)
c. Discuss the advantages and disadvantages of ROI and RI as parameters for appraising divisional performance. (5 Marks)

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  • 15 Marks

PM – Nov 2021 – L2 – Q7 – Pricing Decisions

Calculate transfer prices to meet residual income targets and evaluate sub-optimal decisions for Garki plc.

Garki plc is a holding company with four divisions, including Alba and Beta Divisions. Alba Division produces a component that it sells externally and can also transfer to other divisions within the group. Beta Division uses the components from Alba Division as raw material for its final product. The division can also obtain components from external suppliers. The components from Alba Division undergo further processing at a cost of N4.50 per unit before they are sold to the external market.

The Board of Directors has set up a performance scheme for the divisional managers, including setting performance targets for the next financial year. The following budgeted information is available:

Alba Division Beta Division
Maximum Production Capacity 900,000 units –
Sales to External Customers 700,000 units –
Selling Price (N) N6.80 –
Variable Unit Cost (N) N4.90 –
Divisional Fixed Costs N160,000 N140,000
Capital Employed N4 million N3 million
Residual Income N700,000 N500,000
Divisional Cost of Capital 12% 10%

Beta Division has asked Alba Division to quote a transfer price for the components.

Required:
a. Calculate the transfer price per unit which Alba Division should quote to Beta Division in order for its budgeted residual income target to be achieved. (3 Marks)
b. Calculate the selling price per unit which Beta Division should quote to the external market in order for its budgeted residual income target to be achieved, based on the transfer price quotation. (State clearly your assumptions.) (3 Marks)
c. Explain why the transfer price calculated in (a) may lead to sub-optimal decision-making from the point of view of Garki plc as a whole. (5 Marks)
d. In what circumstances would a negotiated transfer price be used instead of a market-based price? (4 Marks)

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  • 15 Marks

MA – Dec 2023 – L2 – Q1a – Divisional performance

This question assesses the ROI and RI of two divisions, Ken and Yon, and compares their performance.

Ken and Yon are two divisions of a large company that operate in similar markets. The divisions are treated as investment centres, and every month each division prepares an operating statement and submits it to the parent company. Operating statements for the two divisions for October are stated below:

Operating Statements for October Ken (GH¢000) Yon (GH¢000)
Sales revenue 900 555
Variable costs 345 312
Controllable fixed costs (includes depreciation on division assets) 433 222
Uncontrollable apportioned central costs 15 5
Divisional net assets for the year 9,760 1,260

The company currently has a target return on capital of 12% per annum. However, the company believes its cost of capital is likely to rise and it is considering increasing the target return on capital. Currently, the performance of each division and the divisional management are assessed primarily based on Return on Investment (ROI) using controllable profit.

Required:

i) Calculate the annualised Return on Investment (ROI) for divisions Ken and Yon, and discuss their relative performances. (6 marks)
ii) Calculate the annualised Residual Income (RI) using controllable profit for divisions Ken and Yon, and evaluate their division’s performances. (6 marks)
iii) Using appropriate ratios, evaluate the efficiency of the two divisions. (3 marks)

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  • 15 Marks

PM – Nov 2024 – L2 – Q7b – Divisional Performance Measurement

Evaluating division performance using ROI and residual income methods with adjusted cost of capital.

Ngerige and Sons Limited has four operating divisions spread across four cities in Nigeria: Lagos, Kano, Gombe, and Enugu. These divisions are treated as investment centres for performance reporting purposes. The following information is available:

Particulars Lagos Kano Gombe Enugu
Divisional Investment (N) 10,000,000 4,000,000 3,000,000 7,000,000
Divisional Sales (N) 53,000,000 23,000,000 24,600,000 29,400,000
Divisional Variable Costs (N) 50,000,000 22,000,000 23,400,000 27,400,000
Specific Fixed Costs (N) 1,500,000 750,000 600,000 800,000

The company’s annual general fixed cost is N1,300,000, apportioned to divisions based on sales. The cost of capital for Ngerige and Sons Limited is 7.5%. Ignore taxation.

Required:

i. Evaluate the performance of the divisions using the following methods:

  • ROI method. (3 Marks)
  • Residual Income Method. (3 Marks)

ii. Re-evaluate the residual income situation for the company given an adjusted cost of capital of 10%. (3 Marks)

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  • 6 Marks

PM – Nov 2024 – L2 – Q7a – Divisional Performance Measurement

Definitions of Responsibility Accounting, Investment Centre, Return on Investment (ROI), and Residual Income.

Define the following concepts:

i. Responsibility accounting
ii. An investment centre
iii. Return on Investment (ROI)
iv. Residual income

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  • 16 Marks

PM – Nov 2024 – L2 – Q6 – Divisional Performance Measurement

Comparative analysis of Owerri and Isiekenesi event centers based on financial performance metrics

Omegboje and company is a medium-scale outfit that specializes in the rental business in Owerri and Isiekenesi towns. The company operates a large event center in each city, supplying chairs, tables, and canopies for both outdoor and some indoor events.

Each event center manager has some independence in operations and earns a performance bonus of 10% of sales if they achieve more than the standard return on capital employed (ROCE) of 50%.

The following financial data is available for the two centers for the years ending December 31, 2020, and 2019:

Additional Information:

  1. Revenue is derived from rentals and ancillary services.
  2. Both centers have a cost of capital of 15%.
  3. Ignore taxation and inflation.

Required:

a. Discuss the relative performance of the two centers based on: i. Return on Capital Employed (ROCE) ii. Residual Income iii. Profit Margin iv. Current Ratio v. Quick Ratio vi. Gearing Ratio vii. Interest Cover
(7 Marks)

b. Compute the performance bonus for the centers (if any), showing your workings.
(4 Marks)

c. Briefly outline the role of a Management Accountant in project management.
(4 Marks)

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  • 15 Marks

PM – May 2015 – L2 – SB – Q5 – Balanced Scorecard

Evaluate the use of the Balanced Scorecard and analyze investment decisions for Carossi Limited using ROI and RI.

CAROSSI Limited makes quality wooden products such as tables, chairs, benches, and doors. Historically, the company has used mainly financial performance measures to assess the performance of the company as a whole. The company’s Chief Executive Officer has just been informed of the ‘Balanced Scorecard Approach’ and is eager to learn more.

CAROSSI Limited has two Divisions X and Y, each with its own cost and revenue streams. Each Division is managed by a divisional manager who has the power to make all investment decisions within the Division. The cost of capital for both Divisions is 15 percent. Historically, investment decisions have been made by calculating the Return on Investment (ROI) of any opportunities, and presently, the return on investment of each Division is 18 percent.

A recently appointed manager for Division X strongly feels that using Residual Income (RI) to make investment decisions would result in better ‘goal congruence’ throughout the organisation.

Investment Details for Each Division:

Division X Division Y
Capital required for investment (₦m) 88.2 46.0
Revenue generated from investment (₦m) 46.4 28.1
Net profit margin (%) 30 35

The company is seeking to maximise shareholders’ wealth.

Required: a. Describe the Balanced Scorecard Approach to performance measurement. (8 Marks)
b. Determine both the return on investment and residual income of the new investment for each of the two divisions. Comment on these results and take into consideration the manager’s views about residual income. (7 Marks)

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  • 20 Marks

FM – May 2015 – L2 – SB – Q3 – Cost-Volume-Profit (CVP) Analysis

Evaluate Pakex's investment proposal using Residual Income and ROCE, including alternative proposal analysis for decision-making.

Pakex is a division of an automobile group that has five years remaining on a leased premises in which it sells self-assembled motorcycles. The management is proposing an investment of ₦48 million on immediate improvements to the interior of the premises in order to stimulate sales by creating a more effective selling environment. The following information is available:

(i) The expected increase in revenue following the improvements is ₦40 million per annum. The average contribution to sales ratio is expected to be 40%.

(ii) The cost of capital is 16% and the division has a target Return on Capital Employed of 20% based on the net book value of the investment at the beginning of the year.

(iii) At the end of the five-year period, the premises improvements will have a NIL residual value.

(iv) The management staff turnover at Pakex division is high. The division’s investment decisions and management performance measurement are currently based on the figures for the first year of the proposal.

In addition to the above information, there is an alternative proposal that suggests a forecast of the increase in revenue per annum from the premises improvements as follows:

Year 1 2 3 4 5
Increase in Revenue 56 40 40 24 16

All other factors are expected to remain the same.

Required: a. Prepare a summary of the statement of the management’s investment proposal for years 1 to 5 showing Residual Income and Return on Capital Employed for each year using the straight-line depreciation method. (10 Marks)
b. Comment on the use of the figures from the Statement in (a) above as a decision-making and management performance measure. (4 Marks)
c. Calculate the Residual Income and Return on Capital Employed for year 1 using the alternative proposal. (6 Marks)

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  • 30 Marks

PM – Nov 2014 – L2 – Q1 – Divisional Performance Measurement

Analyze transfer pricing impact on divisional performance and group profitability with tax implications for cross-border divisions.

Naijax Group Limited has been in operation since 1980, playing a leading role in the automobile industry.

Division “X,” which is part of the group, manufactures only “265 by 16’’ Rim tyre, which it sells to external customers and also to Division “Y,” another member of the group. Naijax Group’s policy is that:

  • Divisions have the freedom to set transfer prices and choose their suppliers.
  • It uses Residual Income (RI) for performance appraisals.
  • The group’s cost of capital is 12% per annum.

The two divisions’ operating data are as follows:

Division X
Budgeted information for the coming year:
Maximum capacity 150,000 tyres
External sales 110,000 tyres
External selling price N35,000 per tyre
Variable cost N22,000 per tyre
Fixed costs N1,080,000,000
Capital employed N3,200,000,000
Target residual income N180,000,000

Division Y has found two other companies willing to supply tyres:

  • Adex Limited could supply at N28,000 per tyre, but only for annual orders in excess of 50,000 tyres.
  • Banaxa Limited could supply at N33,000 per tyre for any quantity ordered.

Required:

(a) If Division Y provisionally requests a quotation for 60,000 tyres from Division X for the coming year:

i. Determine the transfer price per tyre that Division X should quote in order to meet its residual income target. (9 Marks)

ii. Calculate the TWO prices that Division X would have to quote to Division Y if it becomes the group’s policy to quote transfer prices based on opportunity costs. (2 Marks)

(b) Evaluate the impact of the group’s current and proposed policies on the profits of Divisions X and Y and on group profit. (4 Marks)

c. Assume that Divisions X and Y are based in different countries and consequently pay taxes at different rates: Division X at 55% and Division Y at 25%. If Division X has now quoted a transfer price of N30,000 per tyre for 60,000 tyres, you are required to determine whether it is better for the group if Division Y purchases
60,000 tyres from Division X or from Adex Limited. (15 Marks)

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  • 15 Marks

PM – May 2024 – L2 – SC – Q5 – Divisional Performance Measurement

Calculation of transfer prices and performance appraisal in a holding company.

Zona Tango (ZT) plc is a holding company with four divisions, including Alba and Beta Divisions. Alba Division produces a component that it sells externally, and can also transfer to other divisions within the group.

Beta Division uses the components from Alba Division as a raw material for its final product. The division can also obtain the components from external suppliers. The components, when obtained from Alba Division, undergo further processing at a cost of ₦4.50 per unit before they are sold to the external market.

The Board of Directors, in order to implement a new Appraisal Review, has set up a performance scheme for the divisional managers. A performance target for the next financial year has been set, and the following budgeted information relating to the two divisions has been prepared:

Beta Division has asked Alba Division to quote a transfer price for units of the components.

Required:
a. Calculate the transfer price per unit which Alba Division should quote to Beta Division in order that its budgeted residual income target will be achieved. (3 Marks)
b. Calculate the selling price per unit which Beta Division should quote to the external market in order that its budgeted residual income target will be achieved, based on the transfer price quotation. State clearly your assumptions. (3 Marks)
c. Explain why the transfer price calculated in (a) may lead to sub-optimal decision-making from the point of view of ZT plc, taken as a whole. (5 Marks)
d. In what circumstances will a negotiated transfer price be used instead of a market-based price? (4 Marks)

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  • 20 Marks

PM – Nov 2019 – L2 – Q3 – Pricing Decisions

Evaluate divisional and company profit, ROI, and RI for Rinc Nigeria Ltd.

Rinc Nigeria Limited has two divisions, A and B. Division A specializes in the manufacture of a special part of a product while Division B completes the production and sells the final product. Division A also sells its components to third parties, and Division B can buy parts from external suppliers. Both divisions are profit centers.

The following are for the month of November:

Required:
a. Calculate the profit made by each division and the company as a whole for November. (10 Marks)
b. Calculate the ROI and RI of the divisions and the company. (5 Marks)
c. Discuss the advantages and disadvantages of ROI and RI as parameters for appraising divisional performance. (5 Marks)

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  • 15 Marks

PM – Nov 2021 – L2 – Q7 – Pricing Decisions

Calculate transfer prices to meet residual income targets and evaluate sub-optimal decisions for Garki plc.

Garki plc is a holding company with four divisions, including Alba and Beta Divisions. Alba Division produces a component that it sells externally and can also transfer to other divisions within the group. Beta Division uses the components from Alba Division as raw material for its final product. The division can also obtain components from external suppliers. The components from Alba Division undergo further processing at a cost of N4.50 per unit before they are sold to the external market.

The Board of Directors has set up a performance scheme for the divisional managers, including setting performance targets for the next financial year. The following budgeted information is available:

Alba Division Beta Division
Maximum Production Capacity 900,000 units –
Sales to External Customers 700,000 units –
Selling Price (N) N6.80 –
Variable Unit Cost (N) N4.90 –
Divisional Fixed Costs N160,000 N140,000
Capital Employed N4 million N3 million
Residual Income N700,000 N500,000
Divisional Cost of Capital 12% 10%

Beta Division has asked Alba Division to quote a transfer price for the components.

Required:
a. Calculate the transfer price per unit which Alba Division should quote to Beta Division in order for its budgeted residual income target to be achieved. (3 Marks)
b. Calculate the selling price per unit which Beta Division should quote to the external market in order for its budgeted residual income target to be achieved, based on the transfer price quotation. (State clearly your assumptions.) (3 Marks)
c. Explain why the transfer price calculated in (a) may lead to sub-optimal decision-making from the point of view of Garki plc as a whole. (5 Marks)
d. In what circumstances would a negotiated transfer price be used instead of a market-based price? (4 Marks)

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  • 15 Marks

MA – Dec 2023 – L2 – Q1a – Divisional performance

This question assesses the ROI and RI of two divisions, Ken and Yon, and compares their performance.

Ken and Yon are two divisions of a large company that operate in similar markets. The divisions are treated as investment centres, and every month each division prepares an operating statement and submits it to the parent company. Operating statements for the two divisions for October are stated below:

Operating Statements for October Ken (GH¢000) Yon (GH¢000)
Sales revenue 900 555
Variable costs 345 312
Controllable fixed costs (includes depreciation on division assets) 433 222
Uncontrollable apportioned central costs 15 5
Divisional net assets for the year 9,760 1,260

The company currently has a target return on capital of 12% per annum. However, the company believes its cost of capital is likely to rise and it is considering increasing the target return on capital. Currently, the performance of each division and the divisional management are assessed primarily based on Return on Investment (ROI) using controllable profit.

Required:

i) Calculate the annualised Return on Investment (ROI) for divisions Ken and Yon, and discuss their relative performances. (6 marks)
ii) Calculate the annualised Residual Income (RI) using controllable profit for divisions Ken and Yon, and evaluate their division’s performances. (6 marks)
iii) Using appropriate ratios, evaluate the efficiency of the two divisions. (3 marks)

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