UNIVERSITI TUNKU ABDUL RAHMAN (UTAR)

FACULTY OF BUSINESS AND FINANCE (FBF)

MAY 2018 TRIMESTER

UBAM2023 PERFORMANCE MANAGEMENT

GROUP ASSIGNMENT

Bachelor of Commerce (Hons) (Accounting)

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 GROUP ASSIGNMENT

Instructions to students

The students will work on the assignment in groups of 5-6 students. These groups will be formed by
Week 2. The assignment is to provide the students with the opportunity to synthesize and apply their
knowledge acquired from the course unit.

The assignment question will be uploaded in the WBLE on 23rd July 2018 (Monday) in Week 9.
The students are required to complete their assignments and submit the hardcopies to their
respective tutors latest 27th July 2018 (Friday), at 5 pm. The assignment should be properly typed,
printed and staple-bind for submission. Remember to include Appendix 1 as your cover page and
Appendix 2 as the score sheet.

Late submission will be rejected.

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CASE STUDY: First World Investment Group

First World Investment Group (FW) is an investment group which owns a number of subsidiary
companies. Each subsidiary produces a particular product, product range or service.

For the purposes of management control, the subsidiary companies are organized into three sectors.

Consulting and Services (CS):

CS comprises a consultancy practice which provides advice on product design, manufacturing
technique and material usage both to FW group of companies and to businesses outside the group.
Salaries comprise about 95% of costs in the CS sector.

Heavy Engineering (HE):

HE comprises two subsidiary companies producing machinery, equipment and tools used in a
variety of industrial applications. These companies require a major investment in the form of factory
premises, plant and transport facilities.

Light Engineering (LE):

LE comprises four subsidiaries which produce a range of small mechanical and electrical
components, many of which are designed into the products of HE sector companies. The production
of these components is generally considered to be labour intensive.

At the start of 2018, the management of FW decides to prepare a five-year strategic plan for the
group. A team of FW executives is assembled to prepare this plan.

At its meeting, the team is provided with the following summary of the group’s performance in
2017.

CS HE LE
RM’000 RM’000 RM’000
Book value at 31 December 2017:
Non-current assets 80 4,970 810
Current assets 90 820 180
Non-current liabilities - 1,500 500
Current liabilities 20 140 65

Year to 31 December 2017

Sales 860 6,320 1,918
Material costs 12 2,176 260
Staff costs 608 1,574 1,000
Other operating costs inc. depreciation 20 1,497 418
Trading profit 220 1,073 240

All the above figures are taken from the H group’s main accounting system and are prepared on a
historical cost basis.

The group finance charge is 12% of the capital employed in each sector at the end of the year. This
figure is FW’s cost of money and is used as the discount rate for project evaluation.

At present, FW defines capital employed as total assets minus current liabilities.

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Required:

Question 1

Calculate the return on capital employed (ROCE) and residual income (RI) for each sector. Using
ROCE and RI as performance indicators, rank the performance of the sectors and comment on your
calculations and results.

In an effort to control performance, the management of FW decided to define capital employed as

total assets. Re-calculate the ROCE and RI of the three sectors according to the new definition and
comment on the results.
(20 marks)

Question 2

Discuss the merits and demerits of ROCE and RI as performance indicators and suggest how FW
can overcome their weaknesses as performance indicators. (20 marks)

Question 3

Discuss the relevance of the information given in the question and state what additional information
you would find helpful in advising FW on which of its three sectors should be expanded.
(20 marks)

Question 4

It is now discovered that 50% of the businesses of CS and LE were done with HE. Consolidate the
group accounts of First World Investment Group. Calculate the ROCE and RI of FW and comment
on the financial performance of the group as a whole. (20 marks)

Question 5

Discuss how the depreciation of non-current assets can distort the performance indicators of FW and
recommend how FW can overcome the distortions. (20 marks)
[Total: 100 marks]

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 Appendix I

UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE

ACADEMIC YEAR: 2018/2019

MAY 2018 TRIMESTER

UBAM2023 PERFORMANCE MANAGEMENT

ASSIGNMENT COVER SHEET

Course details

Course : ______________________________________

Year and Trimester of study : _______________________________________

Tutorial Group : _______________________

Lecturer’s Name : _______________________

Tutor’s Name : ________________________

Topic : FIRST WORLD INVESTMENT GROUP

Due Date : Week 09, 27 July 2018 (Friday, 5.00 pm)

Important Note : Submission of assignment is the responsibility of the

students.
Students’ Detail

Name Student ID No.

1.
2.
3.
4.
5

Assignment Overall Marks : ____________ Marks

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 Appendix II

MARKING GUIDE

Case Study:

Criteria Excellent Good Average Poor Marks

(marks) (marks) (marks) (marks) (100)

Q1 16 – 20 12 – 16 8 – 12 4-8
(20 marks)

Q2 16 – 20 12 – 16 8 – 12 4-8
(20 marks)

Q3 16 – 20 12 – 16 8 – 12 4-8
(20 marks)

Q4 16 – 20 12 – 16 8 – 12 4-8
(15 marks)

Q5 16 – 20 12 - 16 8 – 12 4–8
(20 marks)

Total
(100 marks)

Comments:

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

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Name & Signature of marker Date