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Please helpnto answer this with formulas. thank you. 6. Tinggen Berhad is a large conglomerate company structured on a divisional basis. It seeks to maximise

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6. Tinggen Berhad is a large conglomerate company structured on a divisional basis. It seeks to maximise investor wealth. Head office avoids day to day involvement in divisional affairs and only intervenes if performance is considered unsatisfactory. Divisional performance is measured by residual income. One of Tinggen's larger divisions operates a chain of five star hotels throughout the Malaysia. The division's mission statement is 'To be the hotel of first choice for business users and tourists'. Although the chain has generally been popular with tourists it is not proving quite so popular with business users and conference organisers. Competition in the top segment of the hotel market is fierce, with customers expecting the highest standards of facilities, service and catering. Over the last two years the division has invested a large amount of money in modernising its hotels including the improvement of bedrooms and public rooms, installation of gyms and swimming pools and the information technology features required by business travellers. A large amount of money has also been spent on staff training to improve service levels and on a television advertising campaign to promote the improved service levels to business users. Head office is concerned that the performance of the hotel chain appears to have declined over the last few years despite this expenditure. The following figures are available: In RM millions Year 2013 2014 2015 Capital employed 50 70 90 Operating profit 15 16 17 The cost of capital applicable to the hotel division is 20% per annum. Required: (a) Calculate the residual income for the hotel chain for each of the three years. [6 marks] (b) Discuss the advantages and disadvantages of residual income as a divisional performance measure. [8 marks] (c) Explain the advantages to Tinggen Berhad of a balanced Scorecard approach to divisional performance measurement. [8 marks] (d) Suggest two suitable critical success factors suitable for the hotel chain: (i) financial success; customer satisfaction; (iii) process efficiency; (iv) organisational learning and growth. For each critical success factor suggest one key performance indicator suitable for the hotel chain. I [8 marks)

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