LUSAKA Plc has two divisions, GAMMA and OMEGA, whose respective performances are under review. Division GAMMA is

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LUSAKA Plc has two divisions, GAMMA and OMEGA, whose respective performances

are under review. Division GAMMA is currently earning a profit of K35,000 and has net

assets of K150,000. Division OMEGA currently earns a profit of K70,000 with net assets

of K325,000.

LUSAKA Plc has a current cost of capital of 15%.

Required:

(a) Explain the difference between a profit centre and an investment centre of an

organisation. [3 Marks]

(b) Using the information above, calculate the return on investment and residual income

figures for the two divisions under review and comment on your results. [5 Marks]

residual income) is more useful when comparing divisional performance.

Posted Date: May 15, 2024 12:24 PM

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LUSAKA Plc has two divisions, GAMMA and OMEGA, whose respective performances are under review. Division GAMMA is

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Answer a Difference between a profit center and an investment center A profit center is a segment of ... View the full answer

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