• Sliced Bread plc is a divisionalised company. Among its divisions are Grain and Bakery. Grain’s operations include granaries, milling and dealings in the grain markets; Bakery operates a number of bakeries. The following data relate to the year ended 30 November: Divisional managements (DMs) are given authority to spend up to £20,000 on capital items as long as total spending remains within an amount provided for small projects in the annual budget. Larger projects, as well as sales of assets with book values in excess of £20,000, must be submitted to central management (CM). All day-to-day operations (except for divisional overheads) are delegated to DMs. The basis for appraising DM performance is currently under review. At present divisions are treated as investment centres for DM performance appraisal, but there is disagreement as to whether return on capital employed (calculated as divisional profit contribution / total divisional net assets) or residual income (calculated as divisional profit contribution minus a cost of capital charge on the total investment in net assets employed by the division) is the better measure. An alternative suggestion has been made that DM performance should be appraised on the basis of controllable profit; this measure would treat investment in fixed assets as a CM responsibility, thus would require to exclude depreciation and gains or losses on sale of assets. The cost of capital of Sliced Bread plc is 12% per annum. (a) Calculate for both divisions, the three measures (return on capital employed, residual income and controllable profit) which are being considered by Sliced Bread plc, and state any assumptions /reservations about the data you have used in your calculations. (b) Examine the merits and problems of Sliced Bread plc’s three contemplated approaches to DM performance appraisal. (c)“Accounting performance measures are backward-looking and short-term oriented”. Evaluate this statement and explain how organisations attempt to address the problem of short- termism.