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Problem 16

# During the current year, a strategic business unit (SBU) within Roke Inc. saw costs increase by $$\ 2$$ million, revenues increase by $$\ 4$$ million, and assets decrease by $$\ 1$$ million. SBUs are set up by Roke as follows I. cost SBU II. Revenue SBU III. Profit SBU IV. Investment SBU Given the numbers above, a SBU manager will receive a favorable performance review if she is responsible for a: a. I or IV only. b. II or III only. c. I, II, or IV only. d. II,III, or IV only.

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The managers responsible for a Revenue SBU (II) or a Profit SBU (III) will receive a favorable performance review. Revenue increased by $$\ 4$$ million and profit increased by $$\ 2$$ million, showing that they have done their jobs efficiently. Answer: b. II or III only.
See the step by step solution

## Step 1: Examining changes in Cost SBU

In a cost SBU, the main focus is on managing the costs efficiently. The given information says that costs increased by $$\ 2$$ million. An increase in costs suggests that cost management was not efficient and hence, a manager of a Cost SBU will not receive a favorable performance review.

## Step 2: Examining changes in Revenue SBU

A revenue SBU focuses on increasing revenues for the company. In this case, the revenues increased by $$\ 4$$ million. This shows that the manager of a Revenue SBU did their job well, leading to an increase in revenues, which means that he/she will receive a favorable performance review.

## Step 3: Examining changes in Profit SBU

A profit SBU focuses on increasing the overall profit for the company. Profit can be calculated using the formula: Profit = Revenue - Costs. In this case, we have profit = $$\ 4$$ million - $$\ 2$$ million = $$\ 2$$ million. Since profit has increased, it suggests that the manager in charge of a Profit SBU did their job efficiently, leading to a favorable performance review.

## Step 4: Examining changes in Investment SBU

In an investment SBU, the main focus is on managing the company's assets and making wise investments. Since the assets decreased by $$\ 1$$ million, it indicates that investments were not managed properly and hence, a manager of an Investment SBU will not receive a favorable performance review. Based on our analysis in steps 1-4, the correct answer is: b. II or III only.

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