Accounting
Functional
Sales
Purchases
Mktg
Acc
Prod.A
Orgn Structure
PD
SD
Mktg
Product
Acc
Prod.B
Class. based on
PD
SD
Mktg
Europe
Geographical
Divisional
Asia
Africa
Cost centre
Rev Centre
Such Div. can be
Profit centre
F5: Performance Mngt
Invest.Centre
PBIT(ControllableP)/Cap.Emp.*100
Selection ROI => Std.Ret(HO)/Prev.Ret(Div.)
Adv
ROCE
Easy to cal.
Relative measure-Comparison possible
Div may reject inspite if the ret. is greater thn Std ROI fixed by HO,if it is less
thn its prev.performance
Suboptimal behaviour
Doesnot tell abt inc in SH wealth
Disadv
ROI may inc. wo any effort with passage of time as Asset depreciates
Risk ignore
Method
Window Dressing
PBIT-(CE*CoC)
Divisional
RI > 0
Goal congruence as return above CoC is preferred both by Div n HO
Resi.Inc.
Adv
CoC can be adj fr risk.
Tells abt inc. in SH wealth
Comparison issue as Absolute fig
Disadv
RI inc. with passage of time as Assets Depreciates
Manipulation of PBIT and CE
Meaning
Price @ which one Div. trfrs goods to other Div.
Autonomy
Purpose
Transfer Pricing
Div.PM
Each div has a say
Fair perf. meas.
Goal congruence i.e. Co profit max.
SD point(Min)
Theoretical TP
PD point(Max)
No Spare Capacity
Spare Capacity
MC/VC+Opp.C (when no spare capacity)-Savings
MC-Savings
Lowest MP
Goal Congruence b/w HO & Div-RI but Suboptimal beh. in ROI
Div mngr perf. meas. based on wht they r responsible fr
Cont.P
PTR
MinTP-SD
TP
MaxTP-PD
Full Capacity
Spare Capacity
MP
TALCL/SC+LTD
CE
on DoP ofAsset = No chnge in CE(+Asset Pur - Cash)
if there is depn. rate given
on DoS ofAsset = CE chng to the extent of P/L (+Cash Recd-BV of Asset sold)
TC whether Avg./Op/Closing CE to be used as per Q
Company
NPO
PBIT shall go down by depn
CE shall fall by depn
PBIT shall chng to extent of P/L on sale