BLR provides vehicle maintenance services through its chain of garages. Each garag operates as an investment Garage centre. managers are targeted on return on capital employed (ROCE) and receive a bonus ir their garage generates an annual ROCE of 15% or more. At the start of this year, garage managers were informed that each garage would now receive an apportionment of the BLR head office fixed overhead costs. Head office costs are calculated as 7% of sales revenue and are included in other operating costs. BLR Head Office stated that target ROCE would remain at 15% for each of its garages. The following is a summary performance report for Garage A and Garage B: Garage A This year Garage B Last yeaar N$'O00 This yeat N$'O00 Last year NS'000 Sales N$'000 revenue 1 300 1 200 550 Material 500 costs 190 180 80 75 Staff costs 355 350 150 258.5 150 Other operating costs 531 460 180 Profit 224 210 61.5 95 Capital employed 1 600 1 500 400 600 The capital employed figures assets of each in the above table are the net book value of the non-current garage at the end of the year. 23 COC Note: BLR has a cost of capital of 8%. REQUIRED: Marks 2 Explain ONE advantage and ONE disadvantage of each BLR garage being charged an apportionment of BLR head office costs. DiscusS, using the information in the scenario, the advantages and disadvantages of using ROCE to determine manager bonuses. Now using residual income (RI) to assess the performance of garage managers, discuss the advantages and disadvantages of using Rhinstead of ROCE to determine garage managers' bonuses.