The Divisional Managers of West Plc Have Requested That the Method

question 22

Multiple Choice

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
$\begin{array}{|l|l|l|l|}\hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\\hline \text { Sales } & 5,400,000 & 5,000,000 & 5,590,000 \\\hline \text { Controllable costs } & 3,700,000 & 3,502,000 & 3,660,000 \\\hline \text { Head Office Charges } & 998,000 & 1,282,000 & 1,170,000 \\\hline \text { Net Profit } & 702,000 & 716,000 & 760,000 \\\hline\end{array}$

Capital Employed
$\begin{array}{|l|l|l|l|}\hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\\hline \text { Total Investment } & 4,700,000 & 5,100,000 & 5,200,000 \\\hline \text { Controllable Investment } & 4,000,000 & 4,100,000 & 4,274,000 \\\hline\end{array}$
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 Return on Investment for the Western Division

• A)11.1%.
• B)2.30%.
• C)14.1%.
• D)14.6%.

Grasp the distinction between types of norms (descriptive vs. injunctive) and their roles within social groups.

Comprehend the process and effects of resocialization and convergence within groups.

Recognize the impact of role ambiguity and its consequences on group members and overall group function.

Identify the importance of both task and relationship roles in maintaining group cohesion and achieving objectives.

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Definitions:

Inside-out Change

Transformation initiated from within an organization or individual, focusing on internal improvements or developments to effect external outcomes.

Transformational Change

A profound or radical change that fundamentally alters the culture, core values, and operations of an organization, often leading to a shift in its business direction.

Bottom-up Change

A change initiative that starts at the lower levels of an organization and seeks approval or acceptance from higher levels.

Incremental Change

Gradual, step-by-step modifications made in processes, practices, or policies within an organization to improve or adapt.