Divisional Performance Measurement

A Divisional perfoamnce measurement could look like this:

For Example

• Sales...........................900
• less VC.........................400
• CONTRIBUTION+...................500...'(note:no good for management performance measurement because Mgr can control FC'
• less controllable FC............100
• CONTROLLABLE PROFIT.............400...'(Good for Mgr performance measurement unless it's a profit center they have no control over depreciation
• less Non-controllable FC........100

DIV PROFIT Before Corp Exp's.....300...'(Good measure of Division's economic performance)' Corp Exp.........................100...'(Arbitrary allocation) DIV NET PROFIT...................200...'(Good measure of comparison with peer companies)'

See Divisionalization See Residual Income