I recommend this company
to use RI or EVA instead of ROI and to control the investmentsseparately using NPV and capital turnover measures.
The bonus should be based on the budgeted income level, the RI target.
The problem with the inventory level can not be controlled with ROI management.
If thecompany change to RI/EVA it will be possible to to negotiate relevant inventory levels in the budget process. High inventory levels can also be managed with differentiated capital charges