MAC3701
ASSIGNMENT 02
SEMESTER 01
YEAR 2022
, QUESTION A
Comment on whether the management team of the Spice Division will receive
performance-related bonuses or not for the 2022 financial year.
Return on Investment = Controllable profit/Controllable investment x 100
Cost of controllable investment
(11 000 000 − 3 270 000) x 6%) 463 800,00
Residual income 290 000,00
753 800,00
Head office allocated costs 178 000,00
Depreciation ( 5/60 x 1 500 000) - 125 000,00
Controllable profit 806 800,00
Controllable assets
[11 000 000 + 1 500 000 − (1 500 000 x 30%) 12 050 000,00
Depreciation (1 500 000/60 x 5) - 125 000,00
Controllable Liabilities
(3 270 000 + (1 500 000 x 70%)) - 4 320 000,00
Controllable investment 7 605 000,00
Return on Investment = 806 800/7 605 000 x 100 = 10.6088%
Management will receive bonus.
Reason; ROI of 10.6088% greater than target ROI of 10%
ASSIGNMENT 02
SEMESTER 01
YEAR 2022
, QUESTION A
Comment on whether the management team of the Spice Division will receive
performance-related bonuses or not for the 2022 financial year.
Return on Investment = Controllable profit/Controllable investment x 100
Cost of controllable investment
(11 000 000 − 3 270 000) x 6%) 463 800,00
Residual income 290 000,00
753 800,00
Head office allocated costs 178 000,00
Depreciation ( 5/60 x 1 500 000) - 125 000,00
Controllable profit 806 800,00
Controllable assets
[11 000 000 + 1 500 000 − (1 500 000 x 30%) 12 050 000,00
Depreciation (1 500 000/60 x 5) - 125 000,00
Controllable Liabilities
(3 270 000 + (1 500 000 x 70%)) - 4 320 000,00
Controllable investment 7 605 000,00
Return on Investment = 806 800/7 605 000 x 100 = 10.6088%
Management will receive bonus.
Reason; ROI of 10.6088% greater than target ROI of 10%
