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The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts.
Summary of Management Accounts to 31 December 1997
Capital Employed
Cost of Capital
The head office has estimated that the group cost of capital is 10%
Financial and non-financial measures of performance
The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use.
- Calculate the Net Residual Income for the Western Division
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Individuals or groups who advocate for the protection and expansion of rights and equality for all under the law, often focusing on ending discrimination based on race, gender, sexual orientation, or other factors.
James Baldwin
An acclaimed American writer and social critic known for his essays, novels, and plays that explore themes of race, sexuality, and class in mid-20th century America.
Roe V. Wade
The 1973 U.S. Supreme Court decision that recognized a woman’s legal right to an abortion under the U.S. Constitution.
Environmental Movement
A social and political movement focused on advocating for the protection of the environment and addressing issues such as pollution and climate change.
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