Question 2 (20 marks) Metal Products Ltd has two divisions: Pressings and Cans. Pressings produces pressed metal work for industrial and engineering work, while Cans produces cans for the paint and oil industries. The following data relate to the year ended 31 December 2021: Divisional managers (DMs) are given authority to spend up to N$30000 each on capital items, as long as total spending remains within an amount provided for small projects in the annual budget. Projects that are larger, as well as sales of assets with book values in excess of N$30 000 , must be submitted to central management (CM). All day-to-day operations are delegated to DMs, whose performance is monitored with the aid of budgets and reports. The basis for appraising DM performance is currently under review. At present, divisions are treated as investment centres for DM performance appraisal, but there is disagreement as to whether return on capital employed or residual income is the better measure. The cost of capital of Metal Products Ltd is 15% per annum. Page 14 of 16 FACULTY OF COMMERCE, MANAGEMENT AND LAW Question 2 (20 marks) Metal Products Ltd has two divisions: Pressings and Cans. Pressings produces pressed metal work for industrial and engineering work, while Cans produces cans for the paint and oil industries. The following data relate to the year ended 31 December 2021: Divisional managers (DMs) are given authority to spend up to N$30000 each on capital items, as long as total spending remains within an amount provided for small projects in the annual budget. Projects that are larger, as well as sales of assets with book values in excess of N$30 000 , must be submitted to central management (CM). All day-to-day operations are delegated to DMs, whose performance is monitored with the aid of budgets and reports. The basis for appraising DM performance is currently under review. At present, divisions are treated as investment centres for DM performance appraisal, but there is disagreement as to whether return on capital employed or residual income is the better measure. The cost of capital of Metal Products Ltd is 15% per annum. Page 14 of 16 FACULTY OF COMMERCE, MANAGEMENT AND LAW