Question 2 (24 marks) Khomas Beverages Led (8") is company at manufactures and sell beverages. The many la divisioned such that the Windhoek din manufactures soft drinks while the Olhando Divion manfactures bottled water Managers heading each of the two divisions have been empowered to make capital investment decisions of the division without head office Interference Ko mesures the performance of the two divisions based on return on investment (ROI). When the division performs higher than the set Rol of 18%, the divisional managers will be given a performance bonus. In 2010, the Okahandja divisioned on investment that had & ROI of 10% for the reason that would have led their over ROI to 75%. This meant that the division would not have qualified for a performance bonus. When the Head Office of Klart of this bedactice they were happy and have now decided to change how they mature performance by introducing the residual income (RI) approach. Both performance measures are based on the division's controle profit and the average of the division The following summaried operating statement has been prepared by an inexperienced countant and you have been hired to the Windhoek Okahanda NS000 N5000 3800 8 400 Les Vacacosts 1400) DO Contribution 2400 5370 Las Fixed COS (645 (14201 Operating pro 1435 3950 Beginning controlados por division 157000 44000 Ending contro per division 9000 30 000 Notes: 1. Depreciation charge for the division was N$165 000 for Windhoek and NS460 000 for Okahandia. The depreciation charge husstrendy been included in the foots contained in above ring statement on further wigation, you have contained that 30% of the depreciation charge in both divisions relates to those that controlled by the Head Office but are owned by the individual divisions 2. Included in the new figures are at the beginning of any the Okahanda division for a cost of None Olanda con applies the reducing blonde method of depreciation while the Windhoe piese method. It is company policy to change the praction in the more The Windhoek vion did not add any sigricant bonament for the current period 3. The Head Office costs alocated to each on the period were 20 000 for Windhoek and N5700 000 for Okahandja These contained in the fach in operating statement above 4 The weighted average cost of capital (WACC) aplito is 12% 4. Requirement 2.1 Based on the current performance mour RON ne performance the divisions of further 22 Bosing your answer on calculation om den mest performed both the 23 Highlight other factors. You need to the two divisions on Rand dance you would 24 ing the proposed performance are mine peace of the two divisions of 25 What condus. Can you come up willing your bootin (24? 26 DISC My two advantage that might of the income as a performance more 2.7 Discuss any two drawbacks thould be the sypantom the residual income as a performance me NB Where necessary show all relevant working Total 24 Question 2 (24 marks) Khomas Beverages Led (8") is company at manufactures and sell beverages. The many la divisioned such that the Windhoek din manufactures soft drinks while the Olhando Divion manfactures bottled water Managers heading each of the two divisions have been empowered to make capital investment decisions of the division without head office Interference Ko mesures the performance of the two divisions based on return on investment (ROI). When the division performs higher than the set Rol of 18%, the divisional managers will be given a performance bonus. In 2010, the Okahandja divisioned on investment that had & ROI of 10% for the reason that would have led their over ROI to 75%. This meant that the division would not have qualified for a performance bonus. When the Head Office of Klart of this bedactice they were happy and have now decided to change how they mature performance by introducing the residual income (RI) approach. Both performance measures are based on the division's controle profit and the average of the division The following summaried operating statement has been prepared by an inexperienced countant and you have been hired to the Windhoek Okahanda NS000 N5000 3800 8 400 Les Vacacosts 1400) DO Contribution 2400 5370 Las Fixed COS (645 (14201 Operating pro 1435 3950 Beginning controlados por division 157000 44000 Ending contro per division 9000 30 000 Notes: 1. Depreciation charge for the division was N$165 000 for Windhoek and NS460 000 for Okahandia. The depreciation charge husstrendy been included in the foots contained in above ring statement on further wigation, you have contained that 30% of the depreciation charge in both divisions relates to those that controlled by the Head Office but are owned by the individual divisions 2. Included in the new figures are at the beginning of any the Okahanda division for a cost of None Olanda con applies the reducing blonde method of depreciation while the Windhoe piese method. It is company policy to change the praction in the more The Windhoek vion did not add any sigricant bonament for the current period 3. The Head Office costs alocated to each on the period were 20 000 for Windhoek and N5700 000 for Okahandja These contained in the fach in operating statement above 4 The weighted average cost of capital (WACC) aplito is 12% 4. Requirement 2.1 Based on the current performance mour RON ne performance the divisions of further 22 Bosing your answer on calculation om den mest performed both the 23 Highlight other factors. You need to the two divisions on Rand dance you would 24 ing the proposed performance are mine peace of the two divisions of 25 What condus. Can you come up willing your bootin (24? 26 DISC My two advantage that might of the income as a performance more 2.7 Discuss any two drawbacks thould be the sypantom the residual income as a performance me NB Where necessary show all relevant working Total 24