A group of companies is divided into three autonomous operating divisions. The group cost of capital is 15%. In ROCE calculations, the capital employed is taken as the figure at the beginning of the year. All non-current assets are depreciated on a straight line basis.

If no new capital expenditure transactions take place, the forecast results for the next year are:

The managers are proposing the following transactions, all of which take place at the beginning of the year.

Division P: Invest $50,000 to increase net profit by $11,500 per annum

Division Q: Sale at net book value of a machine which is budgeted to earn a net profit after depreciation of $7,000 next year. The original equipment cost $225,000 four years ago with an expected life of five years and no residual value. The sale proceeds would be remitted to Head Office.

Division R: Sale at net book value of $5,000, of a machine which is forecast to earn an annual profit after depreciation of $2,000. Head Office would invest a further $14,000 to enable the purchase of $19,000 of a machine which will earn an annual profit after depreciation of $3,500.

If the proposed transactions went ahead, which divisional managers would receive a higher bonus, if such bonuses are directly related to the level of ROCE in the division?