Question 2: (20 marks)

1. Critically discuss three of the advantages of using the ABC technique, three of the disadvantages of the traditional method and two the problems encountered when trying to implement the ABC system.

2. The following summary information is available regarding CLU Plc.

CLU Plc.
Profit Plan
For the year ending Dec. 31, 2020
Sales Revenue	$640,000
Operating Income	$78,000
Shareholders equity	$240,000
Operating Assets	$260,000
Total Liabilities	$100,000
WACC	32%
Tax rate	24%
Return from Project A	$83,500
Cost of project A	$79,000

Required: Compute and analyze the:

• Return on Investment (ROI) for project A
• Return on Equity (ROE) and its components for the company.
• Residual income (RI)

[Marks: (8+12) = 30]