Page 327 - PM Integrated Workbook 2018-19

Divisional performance measurement and transfer pricing

1.2 The Return on Investment

The Return on Investment (ROI) is a similar measure to ROCE but is
used to appraise the investment decision of an individual department.

Controllable profit
ROI = × 100
Controllable Capital employed

Decision rule: if ROI > target cost of capital then accept divisional project or
appraise division as performing favourably.

319