ADVANCED MANAGEMENT ACCOUNITNG

Syahlen Sdn Bhd have a defictionalized structure and each divisional manager is appraised on Retum on Investment with each manager tasked to improve their ROI figure year on year by at least five percentage points. Syahlen have 25% reducing balance depreciation policy and currently use Net Book Value in their ROI calculations. So, the calculation for ROI is Operating profit Opening NBV of assets. Division A of the organization has shown the following results over the past four years adjusted for inflation: Return on capital employed "000 Year 2013 2014 2015 2016 Operating profit Revenue 108.00 108.00 108.00 108.00 cost including depreciation 66.25 62.30 - 35.25 - 48.20 Operating profit 41.75 45.50 52.75 59.80 Capital employed Cost 185.00 185.00 185.00 185.00 Prov for depreciation 66.25 128.75 - 184.00 - 232.20 Closing balance 138.75 104.06 78.04 58.53 Opening balance 185.00 138.75 104.06 78.04 ROCE (4) 22.6 32.8 50.7 76.6 The manager has enjoyed large bonuses for growing the business and reducing costs year on year. However, however with the latest results showing a very significant change in the ROI figures, questions are being asked about the performance of the division. As a new management accountant, you have been asked to look behind the figures and look at the actual performance of the division and suggest a resolution if there is a problem with the figures. a. REQUIRED: Analyze the overall performance of the division over the last four years. b, Recalculate the ROI figures using Cost of fixed assets instead of book value. What are the advantages and disadvantages of using ROI? (10 Marks) 9 Marks) (Marks) c