Question
Sunilever Plc. owns two subsidiaries from which we obtained the information reported in the table below. Sunilever Plc. designates both subsidiaries as investment centres. Item
Sunilever Plc. owns two subsidiaries from which we obtained the information reported in the table below. Sunilever Plc. designates both subsidiaries as investment centres.
Item | Minimalesse Plc. | Largesse Plc. | |
Total Assets | $10,000 | $100,000 | |
Profit for the year 2012 | $1,500 | $11,000 | |
Cost of Capital | 10% | 10% |
Required:
Prepare a report for Sunilever’s management team addressing the following questions:
a) Firms often define responsibility centres. Discuss responsibility accounting and mention the three main types of responsibility centres. Discuss their main features. Your answer should elaborate on aspects of control related to responsibility centres, and it should also discuss the role of responsibility accounting in the distribution of knowledge throughout an organisation.
b) i.) Determine Return on Investment (ROI) and Residual Income for both Minimalesse Plc. and Largesse Plc. Show your calculations.
ii.) Using the information from the Table above discuss the advantages and disadvantages of using Return on Investment (ROI) for the evaluation of the performance of investment centres. Based on your knowledge on responsibility accounting explain which measure (ROI or RI) would you prefer?
c) During the course the concept of the so called “three-legged stool” was discussed. Discuss the concept of the three-legged stool. Your answer should include a discussion of each of the three legs and the relation of the three-legged stool to control.
d) How does responsibility accounting relate to the controllability principle?
All information is given above
Step by Step Solution
3.44 Rating (154 Votes )
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Document Format ( 2 attachments)
60d5e1d223cda_220859.pdf
180 KBs PDF File
60d5e1d223cda_220859.docx
120 KBs Word File
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started