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
