please solve all the questions.

reference

https://studylib.net/doc/5560557/management-control-in-decentralized-organizations

https://kidsinprisonprogram.files.wordpress.com/2015/12/mgmt-027-chapter-11-slides.pdf

d. Suppose that the minimum required rate of return on operating assets of Megah Berhad is 12% and the performance is now evaluated based on economic value added (EVA). i. Compute the EVA for the Office Products Division for the year 2014. (2 marks) ii. Calculate the new EVA for the Ofce Products Division if the new product line is added. (3 marks) iii. Would the General Manager of Oice Products Division be more likely to accept the new investment project if his performance was evaluated using EVA? Briey explain the reason for his decision. ('2 marks) QUESTION 2 (20 MARKS) Megah Berhad is a decentralized wholesaler with autonomous divisions. Each divisions is being monitored based on its return on investment (ROD), with investment defined as average operating assets employed. The rewards and bonuses are given to the divisional mangers based on ROI. The average overall ROI of the company for 2014 is 15 percent of operating investment. The operating results for Office Products Division for the year 2014 are given as below: Sales RM10,000,000 Variable expenses RM6,000,000 Contribution margin RM4,000,000 Fixed expenses RM3,200,000 Net operating income RM800,000 Divisional operating assets RM4,000,000 The Office Products Division has an opportunity to add a huge investment of RM1,000,000 in a new product line. The cost and revenue characteristics of the new investment per year would be: Sales RM2,000,000 Variable expenses 60% of sales Fixed expenses RM640,000 3 Required: a. Briefly explain the meaning of financial control. Explain how does financial control relates to nonfinancial measures of performance. (3 marks) b. Compute the return on investment (ROD) for the Office Products Division for the year 2014. (2 marks) C. Assume that there is an expansion project on the new product line. i. Calculate the new ROI for the Office Products Division if the new product line is added. (4 marks) ii. Would the General Manager of Office Products Division be more likely to accept the new investment project if his performance was evaluated using ROI? Briefly explain the reason for his decision. (2 marks) iii. Why would the Managing Director of Megah Berhad be more likely to add and accept the new product line based on ROI? Briefly explain the reason for his decision. (2 marks)QUESTION 3 (20 MARKS) Gemilang Berhad is a decentralized wholesaler with four autonomous divisions that operate in similar markets, that are Division A, B, C and D. Each division is being monitored based on its Return on Investment (ROD), with investment defined as total net operating assets employed. The following investment opportunities are available to a Financial Controller: Division Initial Investment Annual Earnings A RM800,000 RM90,000 B RM100,000 RM20,000 C RM300,000 RM25,000 D RM400,000 RM60,000 Required: a. Elaborate on how the Financial Controller could improve the division's ROI. (3 marks) b. It is assumed that the cost of capital of Gemilang Berhad is 10 percent. Based on ROI, which project (s) should be chosen by the Financial Controller? (8 marks) C. If Gemilang Berhad is currently making a return on investment of 16 percent, which project (s) would the Financial Controller choose as the best investment? (2 marks) d. Based on the Residual Income (RI), advice Gemilang Berhad on which division should be chosen as the best investment. (7 marks)QUESTION l (20 MARKS) Cahaya Beer is one of the companies in Malaysia that implement decentralization. The company has No min divisions, that are Division A located in Selangor and Division B located in Perlis. Division A currently sells a condemer to manufacturers of cooling systems in local and overseas market for the price of RMSZU per tmit. The variable costs of the condenser amount to RMBBD. and demand for this product curreraly exceeds the division's ability to supply to the marketplace. Cahaya Beer is considering the condenser as one of its important component in enhancing the refrigeration system that would be produced by Division B. The expected selling price of the refrigeration system is RM1,285. the variable manufacturing costs is RMBZO and the expected transfer price of the condenser is RM490. The top management is anxious to introduce the new refrigeration system. However. it is not possible for Division B to nd other suppliers of the condensers in the quality and quantity desired. The company uses responsibility accounting and Return on Investment (ROI) in measuring divisional performance, and awards bonuses to divisional management. Required: 3. How would Division A's divisional manager likely react to the decision to transfer condensers to Division B? Show computations to support your answer. (3 marks) b. How would Division B's divisioml management likely react to the RM490 transfer price? Show computations to support your answer. (6 marks) c. Assime that a lower transfer price is desired. What parties should be involved in setting the new price? (3 marks) d. From a contribution margin perspective. advise the top management of Cahaya Beer on the transfer of condensers from Division A to Division B. Does the company benet more if Division A sells the condensers to external market. rather than transfers the condensers to Division B? Support your answer by showing relevant workings. {3 marks) B. The Alpha Division of the Beta Berhad manufactures product X at a variable cost of RM40 per unit. Alpha Division's fixed costs, which are sunk, are RM20 per unit. Product X is saleable in a competitive market where the market price of product X is RM70 per unit. On the other hand, Gamma Division of Beta Berhad uses product X to make product Y. The variable costs to convert X to Y are RM20 per unit and the fixed costs, which are sunk, are RM10 per unit. The product Y sells for RM80 per unit. Required: i. Both Alpha and Gamma divisions are to be treated as a profit center. What will be the best transfer price of product X that the divisional managers should choose in order to ensure that Beta Berhad's profit will be maximized? (3 marks) ii. Given that the price from part (a) above is chosen as the transfer price of Product X. What should the divisional manager of the Gamma Division do? (4 marks) iii. Suppose there is no market price for product X. What transfer price should be used for decentralized decision-making? (2 marks) iv . If it is assumed that there is no market for product X, will the operations of the Gamma Division be profitable? (3 marks)QUESTION 4 (20 MARKS) Megah Berhad is a decentralized wholesaler with two autonomous divisions that operate in similar markets that are Division Utara and Division Selatan. Each divisions is being monitored based on its Return on Investment (ROD), with investment defined as total net operating assets employed. The rewards and bonuses are given to the divisional managers based on ROI. At the end of the month, both divisions are required to prepare the operating statement to be submitted to Megah Berhad. The operating statements for these two divisions for the month of December 2018 are as shown below: Operating Statements for December 2018 Division Utara Division Selatan Sales RM900,000 RM555.000 Variable expenses RM345,000 RM312,000 Contribution margin RM555,000 RM243,000 Less: Controllable fixed expenses (Including depreciation on assets) RM95,000 RM42,000 Operating income RM460,000 RM201,000 Less: apportioned Central costs RM338,000 RM180,000 Net income before tax RM122,000 RM21,000 Total Divisional Net assets RM9,760,000 RM1,260,000 The targeted return on capital for Megah Berhad for 2018 is 12 percent per annum. However, the company believe that its cost of capital is likely to rise and is considering an increasing target return on capital in the next future years. Required: a. Calculate the annual Return on Investment (ROD) for both Division Utara and Division Selatan for the year 2018. (4 marks) b. Evaluate the relative performance of both Division Utara and Division Selatan for the year 2018 using the ROI and other relevant information given above. (5 marks) C. Suppose that the minimum required rate of return on operating assets of Megah Berhad is 12 percent and the performance is now evaluated based on Residual Income (RD). i. Calculate the annual RI for both Division Utara and Division Selatan for the year 2018. (4 marks) ii. Evaluate the relative performance of both Division Utara and Division Selatan for the year 2018 using the RI and other relevant information given above. (3 marks) d. Briefly discuss the strengths and weaknesses of ROI and RI as methods of assessing the performance of divisions. (4 marks)QUESTION 3 (20 MARKS) Berjaya Berhad is a decentralized wholesaler with two autonomous divisions that operate in similar markets that are the Properties and Food Services division. Each division has a required rate of return of 15% and is being monitored based on its return on investment (ROI), with investment defined as total net operating assets employed. The planned operating results for the year 2016 are as follows: Division Invested Capital Operating income Properties RM6,000,000 RM900,000 Food Services RM1,000,000 RM200,000 Required: a. Elaborate on how the manager of Properties division could improve its division's ROI. (3 marks) b. Based on the ROI and residual income (RI), advice Berjaya Berhad on which division that shows a better performance for the year 2016. (10 marks) C. The company is planning to have an expansion in the year 2017, which will require each division to increase its investments by RM2,500,000, resulting an increase of its income by RM450,000. Advise Berjaya Berhad on which division that shows a better performance for the year 2017 by looking at the new ROI and RI. (7 marks)QUESTION 4 (20 MARKS) Maju Bersatu Berhad is a decentralized wholesaler with two autonomous divisions that operate in similar markets, that are Division A and Division B. Each divisions is being monitored based on its return on investment (ROI), with investment defined as total net operating assets employed. The rewards and bonuses are given to the divisional mangers based on ROI. At the end of the month, both divisions are required to prepare the operating statement to be submitted to Maju Bersatu. The operating statements for these two divisions for the month of December 2015 are as shown below: Operating Statements for December 2015 Division A Division B Sales RM900,000 RM555,000 Variable expenses RM345,000 RM312,000 Contribution margin RM555,000 RM243,000 Less: Controllable fixed expenses (including depreciation on assets) RM95,000 RM42,000 Operating income RM460,000 RM201,000 Less : apportioned Central costs RM338,000 RM180,000 Net income before tax RM122,000 RM21,000 Total Divisional Net assets RM9,760,000 RM1,260,000 The target return on capital for Maju Bersatu Berhad for 2015 is 12 percent per annum. However, the company believe that its cost of capital is likely to rise and is considering an increasing target return on capital in the next future years. Required: a. Calculate the annualized return on investment (ROI) for both Division A and Division B for the year 2015. (4 marks) b. Evaluate the relative performance of both Division A and Division B for the year 2015 using the ROI and other relevant information given above. (5 marks) C. Suppose that the minimum required rate of return on operating assets of Maju Bersatu Berhad is 12% and the performance is now evaluated based on Residual Income (RI). i Calculate the annualized RI for both Division A and Division B for the year 2015. (4 marks) Evaluate the relative performance of both Division A and Division B for the year 2015 using the RI and other relevant information given above. (3 marks) d. Briefly discuss the strengths and weaknesses of ROI and RI as methods of assessing the performance of divisions. (4 marks)QUESTION 1 (20 MARKS) Gempak Division manufactures electronic component that can be sold either to Division BP of the same company or to outside customers. During the year 2016. 20.000 units of electronic component were produced. which 16,000 units were sold to outside customers and another 4.000 units were transferred and sold to Division BP. The electronic component was used in an electric instrument manufactured by Division BP. where one instrument requires one electronic component. The electronic component of this type is not available from any other sources. Both the selling price and the transfer price per electronic component is RMIZS and its variable cost per electronic component is RMQD. Division BP incurred additional RM100 variable cost per instrument and then sold the instruments for the price of RM300 each. Required: a. Briefly explain the meaning of the term decentralization. (3 marks) b. Briey explain the FIVE (5) benets from implementing the decentralization system. (5 marks) (3. Prepare the income statements for Gempak Division. Division B? and the company as a whole. (7marks) d. Assumed that the full capacity of Gempak Division is 20.000 electronic component per annum. In the next year 201?. Division BP wants to increase its order to 5.000 units of electronic component. Evaluate the decision of Gempak Division to sell the extra 1.000 units electronic component to Division BP from the standpoint of the company as a whole. {5 marks) B. Setia Berhad is a large manufacturing company that specializes in producing cabinets and television for domestic market. There are two divisions in this company that are evaluated as profit centers that are the Cabinet Division and TV Division. The managers of both divisions are evaluated based on their divisional profits. The Cabinet Division manufactures cabinet for television sets, which it sells externally to outside manufacturers of TV sets and also partly sold internally to TV Division. The Cabinet Division charges RM140 per cabinet for all of its sales. The standard cost per unit of cabinet is given as below: RM Variable cost 70 Fixed cost (based on 10,000 units/year) 30 Total cost 100 On the other hand, the TV Division produces and sells a local TV set under its own brand name of QuosTV for the domestic market. Details information about TV Division are as below: RM RM Selling price per TV set 480 Variable cost per TV set: Cost of the cabinet per unit 140 Variable cost of electronic parts 210 350 Contribution margin 130 Fixed costs per TV set (based on 3,000 set/year) 80 Net profit per TV set 50 In the month of April, the TV Division received a special order from an overseas customer for 1,000 QuosTV sets at a very special price of RM340 per set. In view of this, the manager of TV Division requested Cabinet Division to reduce further the transfer price for the TV cabinets. Required: a. Refer to the original data. It is assumed that both the Cabinet Division and TV Division have idle capacity in its production. Evaluate the special order decision to sell 1,000 sets QuosTV at a special price of RM340 in the perspective of Setia Berhad. Decide the best transfer price under this situation. Show relevant computations to support your answer. (5 marks) b, It is now assumed that the Cabinet Division has no idle capacity in its production. Evaluate the special order decision to sell 1,000 sets QuosTV at a special price of RM340 in the perspective of Setia Berhad. Decide the best transfer price under this situation. Show relevant computations to support your answer. (6 marks)QUESTION 2 (20 MARKS) Berjaya Berhad is a decentralized wholesaler with two autonomous divisions that operate in similar markets that are the Properties and Food Services division. Each division has a required rate of return of 15% and is being monitored based on its return on investment (ROI), with investment defined as total net operating assets employed. The planned operating results for the year 2019 are as follows: Division Invested Capital Operating income Properties RM6,000,000 RM900,000 Food Services RM1,000,000 RM200,000 Required: a. Elaborate on how the manager of Properties division could improve its division's ROI. (3 marks) b. Based on the ROI and residual income (RI), advice Berjaya Berhad on which division that shows a better performance for the year 2019. (10 marks) c. The company is planning to have an expansion in the year 2020, which will require each division to increase its investments by RM2,500,000, resulting an increase of its income by RM450,000. Advise Berjaya Berhad on which division that shows a better performance for the year 2020 by looking at the new ROI and RI. (7 marks)QUESTION 3 (20 MARKS) Cahaya Berhad is a subsidiary of Simex Berhad. Cahaya Berhad is being monitored based on its return on investment (ROD), with investment defined as average operating assets employed. The rewards and bonuses of the management are determined based on ROI. The average cost of capital is 8 percent of operating investment. Cahaya Berhad has made a huge investment of RM2,000,000 in Project AA. This Project AA has reported an income of RM200,000 for the year 2014. The company is planning to have an expansion on Project AA, which will require the company to increase its investments in the near future. Required: a. Briefly explain the meaning of financial control. Explain how does financial control relates to nonfinancial measures of performance. (3 marks) b. Compute the current return on investment (ROD) for Cahaya Berhad. (2 marks) c. Compute the current economic value added (EVA) for Cahaya Berhad. (3 marks) d. Assume that there is an expansion project that requires a RM200,000 investment for a return of RM18,000. i. Calculate the new ROI for Cahaya Berhad. (3 marks) ii. Calculate the new EVA for Cahaya Berhad. (4 marks) iii. Would the General Manager be more likely to accept the new investment project if his performance was evaluated using ROI or EVA? Briefly explain the reason for his decision? (5 marks)QUESTION 2 [an MARKS] Utara Division manufactures electronic speaker that can be sold either to South Division of the same company or to outside customers. The electronic speaker was wed in an electronic toys manufactured by South Division. where one toy requires one electronic speaker. The electronic speaker of this type is not available From any other sources. During the year 2014. 20,000 units of electronic speaker were produced, which 10.000 units were sold to outside customers and another 4,000 units were transferred and sold to South Division. Both the selling price and the transfer price for the electronic speaker is RMIZS and its variable cost per speaker is RMQD. South Division incurred additional RM100 variable cost per speaker and then sold the electronic toys for the price of RM300 each. Required: :1. Briey explain the FIVE {5] motivation for decentralization. {5 marks) h. Briey explain the meaning of transfer price. (3 marks) c. Prepare the income statements for Utara Division. South Division and the company as a whole. {8 marks) :1. Assumed that the full capacity of Utata Division is 20.000 electronic speakers per annum. In the next year 2015. South Division wants to increase its order to 5.000 units of electronic speaker. Would you recommend that Utara Division to sell the extra 1,000 units electronic speaker to South Division? Explain your reasons for your reconunendation from the standpoint of the company as a whole. {1 mar-Pei