Mai Co are considering setting up another division selling expensive watches. The two divisions would be run as profit centres, with head office costs being allocated to each division. Managers^ bonuses will be dependent on the divisions meeting their targets. Targets that are being considered are: (i) Gross profit percentage (ii) Contribution (iii) Net profit for the division (iv) Return on capital employed. Which of the targets should be used to assess the performance of the divisional manager and provide motivation?
A、(i) only
B、(i) and (ii) only
C、(i), (ii) and (Hi) only
D、All of them
A、(i) only
B、(i) and (ii) only
C、(i), (ii) and (Hi) only
D、All of them
【参考答案及解析】
B - net profit for the division would include the allocated head office expenses which are not controllable, and would therefore affect motivation. ROCE is calculated using net profit so this would be misleading as well.
B - net profit for the division would include the allocated head office expenses which are not controllable, and would therefore affect motivation. ROCE is calculated using net profit so this would be misleading as well.