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QUIZ RESULTS
Week 12: Standard Costing and Variance Analysis

Total Questions: 50 Legend:

  Correct Chosen Answer
Your Score: 14/50   Incorrect Chosen Answer
Your Rating: 28%   Correct Answer

1. A labor efficiency debit balance indicates that:

a. The wage rate paid to production workers was less the standard.
b. The wage rate paid to production workers was above the standard.
c. Less labor time was spent on production than was called for by the standard.
d. More labor time was spent on production than was called for by the standard.
2. Which of the following is correct with regard to using the standard quantity to compute materials variances? Standard quantity
used:
a. Materials Price Variance: Yes; Materials Quantity Variance: No
b. Materials Price Variance: Yes; Materials Quantity Variance: Yes
c. Materials Price Variance: No; Materials Quantity Variance: No
d. Materials Price Variance: No; Materials Quantity Variance: Yes
3. Which of the following is correct with regard to using the standard unit price to compute materials variances? Standard unit price
used:
a. Materials Price Variance: Yes; Materials Quantity Variance: No
b. Materials Price Variance: Yes; Materials Quantity Variance: Yes
c. Materials Price Variance: No; Materials Quantity Variance: No MNL-22-1392
d. Materials Price Variance: No; Materials Quantity Variance: Yes
4. At the beginning of the year, Douglas Company prepared the following monthly budget for direct materials.

Units produced and sold    10,000    15,000

Direct Materials P 15,000 P 22,500

At the end of the month, the company's records showed that 12,000 units were produced and sold and P 20,000 was spent for
direct materials. The variance for direct materials is

a. P 2,000 favorable
b. P 2,000 unfavorable
c. P 5,000 favorable
d. P 5,000 unfavorable
5. A company had a total labor variance of P 15,000 favorable and a labor efficiency variance of P18,000 unfavorable. The labor price
variance was
a. P 3,000 favorable
b. P 3,000 unfavorable
c. P 33,000 favorable
d. P 33,000 unfavorable
6. Lee manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for
the production of 5,000 units for the month of June included 10,000 hours of direct labor at P15 per hour, P 150,000. During June,
4,500 units were produced, using 9,600 direct labor hours, incurring P 39,360 of variable overhead, and showing a variable
overhead efficiency variance of P2,400 unfavorable. The standard variable overhead rate per direct labor hour was
a. P 3.85
b. P4.00
c. P4.10
d. P6.00
7. Cordell Company uses a standard cost system. On January 1 of the current year, Cordell budgeted fixed manufacturing overhead
cost of P 600,000 and production at 200,000 units. During the year, the firm produced 190,000 units and incurred fixed
f t i h d f P 595 000 Th
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manufacturing overhead of P 595,000. The production volume variance for the year was
a. P 5,000 unfavorable

b. P 10,000 unfavorable
c. P 25,000 unfavorable
d. P 30,000 unfavorable
8. Harper Company’s performance report indicated the following information for the past month.

Actual total overhead P 1,600,000

Budgeted fixed overhead 1,500,000
Applied Fixed overhead @ P3.00 per labor hour 1,200,000
Applied variable overhead @P.50 per labor hour 200,000
Actual Labor hours 430,000

Harper’s total overhead spending variance for the month was

a. P 100,000 favorable
b. P 115,000 favorable
c. P 185,000 unfavorable
d. P 200,000 unfavorable
9. The JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT estimated variable factory
overhead of P 600,000 and fixed factory overhead of P 400,000. JoyT uses a standard costing system, and factory overhead is
allocated to units produced on the basis of standard direct labor hours. The denominator level of activity budgeted for this year
was 10,000 direct labor hours, and JoyT used 10,300 actual direct labor hours. Based on the output accomplished during this year,
9,900 standard direct labor hours should have been used. Actual variable factory overhead was P 596,000, and actual fixed factory
overhead was P 410,000 for the year. Based on this information, the variable overhead spending variance for JoyT for this year
was
a. P 24,000 unfavorable
b. P 2,000 unfavorable
c. P 4,000 favorable
d. P 22,000 favorable

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10. A quantity of a particular raw material was purchased for P 43,250. The standard cost of the material was P2.00 per kilogram and
there was an unfavorable materials price variance of P 3,250. How many kilograms were purchased?
a. P 20,000
b. P 21,625
c. P 23,250
d. P 24,875
11. A total of 6,850 kilograms of a raw material was purchased at a total cost of P 21,920. The material price variance was P 1,370
favorable. The standard price per kilogram for the raw material must be:
a. P0.20
b. P3.00
c. P3.20
d. P3.40
12. The following information pertains to Bates Company's direct labor for March:

Standard direct labor-hours 21,000

Actual direct labor-hours 20,000
Favorable direct labor rate variance P 8,400
Standard direct labor rate per hour P6.30

What was Bates' total actual direct labor cost for March?

a. P 117,600
b. P 118,000
c. P 134,000
d. P 134,400
13. Use the following information to answer items 13 & 14:
Vermeillen Corporation uses a standard costing system in which variable
manufacturing overhead is assigned to production on the basis of the number of machine setups. The following data pertain to
one month's operations:

     • Variable manufacturing overhead cost incurred: P 70,000

     • Total variable overhead variance: P 4,550 favorable

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     • Standard machine setups allowed for actual production: 3,550

     • Actual machine setups incurred: 3,500

The standard variable overhead rate per machine setup is:

a. P20.00
b. P21.30
c. P18.44
d. P21.00
14. The variable overhead spending variance is:
a. P 1,000 favorable
b. P 1,000 unfavorable
c. P 3,500 unfavorable
d. P 3,500 favorable
15. At the end of April, the Manufacturing Overhead account of Askey Company showed a debit balance of P 6,000 after overhead
had been applied for the month. If the actual total manufacturing overhead cost incurred in April was P 108,600, and if 8,550 units
were produced in April, then the total (combined) rate for applying manufacturing overhead cost per unit is:
a. P13.40
b. P13.00
c. P12.80
d. P12.00
16. Use the following information to answer items 16-18
Norman Enterprises has a standard cost system in which manufacturing
overhead is applied to units of product on the basis of standard direct labor-hours (DLHs). The company has provided the
following data concerning its fixed manufacturing overhead costs for last year:

Total actual fixed overhead cost incurred P 42,000

Fixed overhead cost over-applied P 6,000
Number of units produced 12,500
Volume variance, unfavorable
Standard labor-hours per unit
P 3,600
1.6 DLHs
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The fixed portion of the predetermined overhead rate last year was:

a. P 1.80 per DLH

b. P 2.40 per DLH
c. P 2.88 per DLH
d. P 3.84 per DLH
17. The budgeted fixed overhead cost last year was:
a. P 41,000
b. P 42,000
c. P 44,400
d. P 51,600
18. The budget variance for fixed overhead last year was:
a. P 9,600 favorable
b. P 9,600 unfavorable
c. P 2,400 favorable
d. P 2,400 unfavorable
19. The following information are given:

  Budgeted Actual
Production in units 50,000 55,000
Manufacturing P 800,000
P 750,000
overhead
Sales in units No data 47,000

No beginning inventories. The under or over applied overhead is?

a. P 25,000 under
b. P 75,000 over
c. P 25,000 over
d. P 75,000 under
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d. 5,000 u de

20.
Martin Company uses a two-way analysis of overhead variances. Selected data for September 2017 production activity are as
follows:

Actual variable factory overhead P 196,000

Standard direct labor hours 33,000
Variable overhead rate per DLH P6.00
Actual direct labor hours 32,000

Assuming that budgeted fixed overhead costs are equal to actual fixed costs, the controllable variance for September 2017 is:

a. P 2,000 Favorable
b. P 4,000 unfavorable
c. P 4,000 favorable
d. P 6,000 favorable
21. Toy Inc. reported the following data for 2020:

Actual hours 120,000

Fixed predetermined overhead rate P6.00 per hour
Denominator hours 150,000
Variable predetermined overhead rate P4.00 per hour
Standard hours allowed for output 140,000

Toy’s 2020 volume variance was

a. P 60,000 unfavorable
b. P 60,000 favorable
c. P 180,000 favorable
d. P 180,000 unfavorable
22. Items 22 & 23 are based on the following information: The following data relate to product no. 33 of La Quinta Corporation:

Direct labor standard: 5 hours at P14 per hour

Direct labor used in production: 45,000 hours at a cost of P 639,000

Manufacturing activity: 8,900 units completed
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The direct-labor rate variance is:

a. P 8,900F
b. P 8,900U
c. P 9,000F
d. P 9,000U
23. The direct-labor efficiency variance is:
a. P 7,000F
b. P 7,000U
c. P 7,100F
d. P 7,100U
24. Sammons Corporation had a favorable direct-labor efficiency variance of P 6,000 for the period just ended. The actual wage rate
was P0.50 more than the standard rate of P12.00. If the company's standard hours allowed for actual production totaled 9,500,
how many hours did the firm actually work?
a. 9000
b. 9020
c. 9980
d. 10000
25. Courtney purchased and consumed 50,000 gallons of direct material that was used in the production of 11,000 finished units of
product. According to engineering specifications, each finished unit had a manufacturing standard of five gallons. If a review of
Courtney's accounting records at the end of the period disclosed a material price variance of P 5,000U and a material quantity
variance of P 3,000F, determine the actual price paid for a gallon of direct material.
a. P0.50
b. P0.60
c. P0.70
d. None of these
26. Soloman Corporation recently purchased 25,000 gallons of direct material at P5.60 per gallon. Usage by the end of the period
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amounted to 23,000 gallons. If the standard cost is P6.00 per gallon and the company believes in computing variances at the
earliest point possible, the direct-material price variance would be calculated as:

a. P800F
b. P 9,200F
c. P 9,200U
d. P 10,000F
27. Dana, Inc. recently completed 56,000 units of a product that was expected to consume four pounds of direct material per finished
unit. The standard price of the direct material was P8.50 per pound. If the firm purchased and consumed 228,000 pounds in
manufacturing (cost = P1,881,000), the direct-material quantity variance would be figured as:
a. P 34,000U
b. P 34,000F
c. P 57,000U
d. P 57,000F
28. Item 28 & 29 are based on the following information: Abbott has a standard variable overhead rate of P4.50 per machine hour,
and each unit produced has a standard time allowed of three hours. The company's static budget was based on 46,000 units.
Actual results for the year follow.

Actual units produced:      42,000

Actual machine hours worked:    120,000

Actual variable overhead incurred: P 520,000

Abbott's variable-overhead spending variance is:

a. P 20,000F
b. P 20,000U
c. P 27,000F
d. P 27,000U
29. Abbott's variable-overhead efficiency variance is:
a. P 20,000F
b. P 20,000U
c. P 27,000F
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d. P 27,000U
30. Luke, Inc. has a standard variable overhead rate of P5 per machine hour, with each completed unit expected to take three
machine hours to produce. A review of the company's accounting records found the following:

Actual production: 19,500 units

Variable-overhead efficiency variance: P 9,000U

Variable-overhead spending variance: P 21,000F

What was Luke's actual variable overhead during the period?

a. P 262,500
b. P 280,500
c. P 304,500
d. P 322,500
31. Atlanta Enterprises incurred P 828,000 of fixed overhead during the period. During that same period, the company applied P
845,000 of fixed overhead to production and reported an unfavorable budget variance of P 41,000. How much was Atlanta's
budgeted fixed overhead?
a. P 787,000
b. P 804,000
c. P 869,000
d. P 886,000
32. Enberg Company, which applies overhead to production on the basis of machine hours, reported the following data for the
period just ended:

Actual units produced: 14,800

Actual fixed overhead incurred: P 791,000

Standard fixed overhead rate: P13 per hour

Budgeted fixed overhead: P 780,000

Planned level of machine-hour activity: 60,000

If Enberg estimates four hours to manufacture a completed unit, the company's fixed-overhead volume variance would be:
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be g est ates ou ou s to a u actu e a co p eted u t, t e co pa y s ed o e ead o u e a a ce ou d be:

a. P 10,400F

b. P 10,400U
c. P 11,000F
d. P 11,000U
33. Benson Company, which uses a standard cost system, budgeted P600,000 of fixed overhead when 40,000 machine hours were
anticipated. Other data for the period were:

Actual units produced: 10,000

Standard production time per unit: 3.9 machine hours

Fixed overhead incurred:          P 620,000

Actual machine hours worked: 42,000

Benson's fixed-overhead volume variance is:

a. P 10,000F
b. P 15,000F
c. P 15,000U
d. P 20,000F
34. Use the following information to answer items 34-37:
Standard Company has developed standard manufacturing overhead costs
based on a capacity of 180,000 direct labor-hours (DLHs) as follows:

Standard overhead costs per unit:  

         Variable portion (2 DLH @ P3.00/DLH P 6.00
         Fixed portion (2 DLH @ P5.00/DLH 10.00

The following data pertain to operations in April:

Actual Output 80,000 units

Actual direct labor cost P 644,000
Actual direct labor hours worked 165,000 DLHs
Variable overhead cost incurred P 518,000
Fixed overhead cost incurred P 860,000

The variable overhead spending variance for April was: MNL-22-1392

a. P 15,000 unfavorable
b. P 23,000 unfavorable
c. P 38,000 favorable
d. P 38,000 unfavorable
35. The variable overhead efficiency variance for April was:
a. P 15,000 unfavorable
b. P 23,000 unfavorable
c. P 38,000 favorable
d. P 38,000 unfavorable
36. The fixed overhead budget variance for April was:
a. P 40,000 unfavorable
b. P 40,000 favorable
c. P 60,000 favorable
d. P 60,000 unfavorable
37. The fixed overhead volume variance for April was
a. P 60,000 unfavorable
b. P 60,000 favorable
c. P 100,000 favorable
d. P 100,000 unfavorable
38. Franklin Products has an estimated practical capacity of 90,000 machine hours, and each unit requires two machine hours. The
following data apply to a recent accounting period.

Actual variable overhead P240,000

Actual fixed overhead P442,000

Actual machine hours worked     88,000

Actual finished units produced     42,000

Budgeted variable overhead at 90,000 machine hours P200,000

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Budgeted fixed overhead P450,000

Of the following factors, Baltimore’s production volume variance is most likely to have been caused by

a. a wage hike granted to a production supervisor.

b. a newly imposed initiative to reduce finished goods inventory levels.
c. acceptance of an unexpected sales order.
d. temporary employment of workers with lower skill levels than originally anticipated.
39. Lee Manufacturing uses a standard cost system with overhead applied based upon direct labor hours. The manufacturing budget
for the production of 5,000 units for the month of May included the following information.

Direct labor  (10,000 hours at P15 per hour) P150,000 

Variable overhead     30,000

Fixed overhead     80,000

During May, 6,000 units were produced and the fixed overhead budget variance was P2,000 favorable. Fixed overhead during
May was

a. underapplied by P2,000
b. overapplied by P16,000
c. underapplied by P16,000
d. overapplied by P18,000
40. A manufacturer of radios uses a standard costing system and records variances at the earliest date possible. To take advantage of
quantity discounts and avoid shortages, the company normally maintains inventories of the various materials that are required to
produce radios. When a journal entry is made to record the issuance of direct materials into the production process, the
difference between the debit to the work-in-process account and the credit to the direct materials control account is the direct
materials
a. price variance.
b. efficiency variance
c. price and efficiency variances combined.
d. production volume variance.
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41. Marshland Manufacturers had set its static (master) budget sales at 25,000 units and its budgeted selling price at P30 per unit.
Actual sales volume, however, was 28,000 units and actual selling price was P28 per unit. The sales volume variance was
a. P84,000 unfavorable
b. P90,000 unfavorable
c. P84,000 favorable.
d. P90,000 favorable.
42. A company makes one product and uses a standard cost system. Last month 4,500 units of the product were made, and the
labour efficiency variance was P8,000 favourable. The standards for direct labour are 2.5 hours per unit at P16 per hour. What was
the actual number of direct labour hours worked last month?
a. 11750
b. 10750
c. 12500
d. 11050
43. Which of the following is the most appropriate explanation for a company that experienced a favourable material price variance
and an unfavourable material quantity variance?
a. Materials were purchased at a discount and workers were well trained.
b. The price of materials has decreased and demand for the product has decreased.
c. The actual quantity of material purchased was less than the estimated budgeted amount.
d. Lower-quality materials that resulted in excessive waste were purchased at a discount.
44. A company had monthly sales of P612,000 with a favorable static-budget variance of P50,000 and a favorable selling-price
variance of P10,000. If the sales-volume variance was P60,000 favorable, what was the flexible-budget variance?
a. P70,000 favorable
b. P20,000 unfavorable
c. P100,000 favorable
d. P10,000 unfavorable
45. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received, not all
candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of beeswax or
th ti St d di di
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synthetic wax. Standard ingredients for 1,000 pounds of candles are:

Input: Standard Mix Standard Cost per Pound

Beeswax   200 lbs. 1.00

Synthetic wax   840 lbs. 0.20
Colors      7 lbs. 2.00
Scents       3 lbs. 6.00
Totals 1,050 lbs. 9.20

Standard output 1,000 lbs.  

Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for
Valentine’s Day. Actual production then was:

             Input:                                                                                                                                                                              In
Pounds

Beeswax   4,100

Synthetic wax 13,800

Colors   2,200
Scents       60

Total 20,160

The material yield variance is:

a. P280 unfavorable
b. P3,989 unfavorable
c. P280 favorable
d. P3,989 favorable
46. Clean Harry Corp. uses two different types of labor to manufacture its product. The types of labor, Mixing and Finishing, have the
following standards:

Labor Type Standard Mix Std Hourly Rate Standard Cost

Mixing 500 hours P10 P5,000
Finishing 250 hours P5 P1,250

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Yield: 4,000 units    

During January, the following actual production information was provided:

Labor Type Actual Mix

Mixing 4,500 hours
Finishing 3,000 hours
Yield:  36,000 units

What is the labor mix variance?

a. P2,500 F
b. P5,000 F
c. P2,500 U
d. P5,000 F
47. Items 47 to 50 are based on the following information:

The management of Butuan Corporation asked you to submit an analysis of the increase in their gross profit in 2020 based on
the past two0year comparative income statements which are shown below:

  2020 2019

Net Sales P 1,237,500 P 1,000,000

Cost of Sales       950,000       800,000

Gross Profit P    287,500 P    200,000

The only known factor given to you is that sales price increased 12.5% beginning January 2020. The increase in gross profit due to
increase in volume is

a. P 50,000
b. P 35,000
c. P 20,000
d. P 15,000
48. Gross Profit declined due to increase in cost in the amount of
a. P 70,000
b. P 88,000
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,
c. P 97,500

d. P 51,000
49. The increase in sales prices caused an increase in gross profit by
a. P 100,000
b. P 137,5000
c. P 110,000
d. P 115,000
50. The percent of change in volume is
a. 0.1275
b. 0.11
c. 0.15125
d. 0.1

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QUIZ RESULTS
Week 13: Balanced Scorecard

Total Questions: 20 Legend:

  Correct Chosen Answer
Your Score: 4/20   Incorrect Chosen Answer
Your Rating: 20%   Correct Answer

1. An increasingly popular approach that integrates financial and customer performance measures with measures in the areas of
internal operations and learning and growth is known as:
a. the integrated performance measurement tool (IPMT).
b. the balanced scorecard.
c. gain sharing.
d. cycle efficiency.
2. The typical balanced scorecard is best described as containing:
a. financial performance measures.
b. non-financial performance measures.
c. neither financial nor nonfinancial performance measures.
d. both financial and nonfinancial performance measures.
3. Swedish Cruise Lines (SCL), which operates in a very competitive marketplace, is considering four categories of performance
measures: (1) profitability measures, (2) customer-satisfaction measures, (3) efficiency and quality measures, and (4) learning
and growth measures. The company assigns one manager to each ship in its fleet to oversee the ship's general operations. If SCL
desired to adopt a balanced-scorecard approach, which measures should the firm use in the evaluation of its managers?
a. 1, 2.
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b. 2, 3.
c. 1, 2, 4.
d. 1, 2, 3, 4.
4. Lead indicators guide management to:
a. take actions now that will have positive effects on organizational performance now.
b. take actions now that will have positive effects on organizational performance in the future.
c. take actions in the future that will have positive effects on organizational performance now.
d. take actions in the past that will have positive effects on organizational performance in the future.
5. When using a balanced scorecard, a company's market share is typically classified as an element of the firm's:
a. financial performance measures.
b. customer performance measures.
c. learning and growth performance measures.
d. internal-operations performance measures.
6. When using a balanced scorecard, which of the following is typically classified as an internal-operations performance measure?
a. Cash flow.
b. Employee training hours.
c. Number of employee suggestions.
d. Number of suppliers used.
7. Which of the following balanced-scorecard perspectives is influenced by a company's vision and strategy?
a. Customer.
b. Internal operations.
c. Learning and growth.
d. All of these.
8. ________ performance measures are often ________ indicators that arrive too late to prevent problems in organizations.
a. Non-financial; lagging
b. Non-financial; leading
Fi i l L i
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c. Financial; Lagging
d. Financial; Leading
9. Market share and customer survey scores are performance measures used to monitor the achievement of the ________ goal.
a. Financial performance measures.
b. Customer performance measures.
c. Learning and growth performance measures.
d. Internal-operations performance measures.
10.Cycle time is a performance measure used to monitor the achievement of the ________ goal.
a. Financial performance measures.
b. Customer performance measures.
c. Learning and growth performance measures.
d. Internal-operations performance measures.
11.The balanced scorecard provides an action plan for achieving competitive success by focusing management’s attention on
critical success factors. Which one of the following is not one of the competitive success factors commonly focused upon in the
balanced scorecard?
a. Competitor business strategies.
b. Financial performance measures.
c. Internal business processes.
d. Employee innovation and learning.
12.Which one of the following statements about a balanced scorecard is incorrect?
a. It seeks to address the problems associated with traditional financial measures used to assess performance.
b. The notion of value chain analysis plays a major role in the drawing up of a balanced scorecard.
c. It relies on the perception of the users with regard to service provided.
d. It is directly derived from the scientific management theories.
13.Which one of the following is a ‘lag’ performance indicator?
a. Number of complaints received from customers
b. Output per employee
c. Number of training hours per employee MNL-22-1413
d. Return on capital employed
14.Which one of the following statements is true?
a. Balanced Scorecards can be used in Not-for-Profit organizations
b. Balanced Scorecards always have four perspectives
c. Balanced Scorecards are a feedback mechanism
d. Balanced Scorecards can only be updated on an annual basis
15.Which of the following statements is false? Balanced scorecards:
a. are one type of performance dashboard
b. can be cascaded to different levels/parts of organizations
c. can be used to produce strategy maps
d. cannot be used in conjunction with budgetary control systems
16.Which of the following statements is correct?
One fundamental idea of balanced scorecards is to increase the number of performance indicators used to manage the
a. business.
b. The fundamental idea of balanced scorecards is to create corporate strategy.
c. Balanced scorecards always report using the same time periods as the financial accounting system
d. Organizations sometimes use a ‘traffic-light’ system on their balanced scorecard to help them prioritize their activities.
17.The Balanced Scorecard process captures a cause and effect relationship based on having all parts linked together. Strategic
areas link down to goals, strategic goals link down to strategic objectives, and strategic objectives are linked to:
a. Mission
b. Goals
c. Budgets
d. Measurements
18.The very bottom perspective of the Balanced Scorecard is the ultimate "enabler" for the three top layers. This bottom perspective
is called:
a. Internal Processes
b Learning & Growth
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b. Learning & Growth
c. Market Share

d. Shareholder Value
19.Which of the following is an example of a measurement?
a. Growing Revenues to Improve Shareholder Value
b. Number of Employee Suggestions
c. Operational Efficiency
d. Product Leadership & Innovation
20.In order to get the most out of the Balanced Scorecard, it should not be thought of as a:
a. Stand-alone performance measurement program.
b. Framework for communicating and executing strategy.
c. Tool for shifting emphasis from short term thinking to strategic thinking.
d. Strategic management system.

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QUIZ RESULTS
Week 13: Financial Forecasting

Total Questions: 19 Legend:

  Correct Chosen Answer
Your Score: 5/19   Incorrect Chosen Answer
Your Rating: 26%   Correct Answer

1. Jones Company sales last year were P25 million and its total assets were P8 million. Accounts payable was P2 million and
common stock and retained earnings was P5 million. Jones sales are forecasted to be P30 million this year, earnings after tax are
expected to be 3% of sales, and dividends of P 250,000 are expected to be paid. Assuming that the ratio of assets to sales and
current liabilities to sales remain the same this year as last year, determine the amount of additional financing required.
a. P 550,000
b. P 1,200,000
c. P 300,000
d. none of the above
2. Which of the following statement is correct?
a. If AFN is equals to zero, the percentage of increase in sales at this level is called sustainable growth rate.
b. If AFN has a negative value, the company could source the additional funds internally.
c. Both statements are true
d. None of the above
3. Which of the following decreases the AFN?
a. Higher sales: increase asset requirements
b. Higher profit margin MNL-22-1413
c. Higher capital intensity ratio or A*/S0
d. Higher dividend payout ratio
4. The pro forma ________ shows expected operating results for the budgeting year while the pro forma _________ shows the expected
financial condition at the end of the budgeting period.
a. Balance sheet: Income statement
b. Income statement: Balance sheet
c. Cash flow: Income statement
d. Cash flow: balance sheet
5. Which of the following would be consistent with a more aggressive approach to financing working capital?
a. Financing short-term needs with short-term funds.
b. Financing permanent inventory buildup with long-term debt
c. Financing seasonal needs with short-term funds.
d. Financing some long-term needs with short-term funds.
6. Which asset-liability combination would most likely result in the firm's having the greatest risk of technical insolvency?
a. Increasing current assets while lowering current liabilities.
b. Increasing current assets while incurring more current liabilities.
c. Reducing current assets, increasing current liabilities, and reducing long-term debt.
d. Replacing short-term debt with equity.
7. Which of the following illustrates the use of a hedging (or matching) approach to financing?
a. Short-term assets financed with long-term liabilities.
b. Permanent working capital financed with long-term liabilities.
c. Short-term assets financed with equity.
d. All assets financed with a 50 percent equity, 50 percent long-term debt mixture.
8. Spontaneous financing includes
a. accounts receivable
b. accounts payable
i th t f t
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c. is the amount of current assets required to meet a firm's long-term minimum needs.
d. a line of credit
9. Permanent working capital
a. varies with seasonal needs.
b. includes fixed assets.
c. includes accounts payable.
d. includes accounts payable.
10.Fish Corporation expects net income next year to be P600,000. Inventory and accounts receivable will have to be increased by
P300,000 to accommodate this sales level. Frisch will pay dividends of P400,000. How much external financing will Frisch Fish
need assuming no organically generated increase in liabilities?
a. P 200,000
b. P 100,000
c. P 300,000
d. None of the above
11.Ideally, which of the following type of assets should be financed with long-term financing?
a. Fixed Asset Only
b. Fixed Asset and Temporary Current Assets
c. Fixed Asset and Permanent Current Assets
d. Temporary and Permanent Current Assets
12.You are given the following data about firm ABC: Predicted change in total assets = P 400,000; Predicted change in sales = P
300,000; Predicted change in retained earnings = P 150,000; The external financing needs will be equal to:
a. P (100,000)
b. P 150,000
c. P 250,000
d. P (250,000)
13.A company had P 500,000 of sales for the year just ended and is projecting sales of P 600,000 for the coming year. For every P1
increase in sales, 38% of additional financing is required for the purchase of additional assets. The projected profit margin is 20%

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and 60% of profits will be retained for reinvestment in the company. The amount of additional external financing needed by the
company in the coming year is:
a. zero
b. P 38,000
c. P 86,000
d. P 110,000
14.A company assets and liabilities as a percentage of total sales for the period just ended are 65% and 20% respectively. Net profit
margin is 12% and pay-out ratio is 60%. If sales are expected to increase by 25% in the coming year, how much is the additional
financing needed?
a. P 225,000
b. P 105,000
c. P 45,000
d. None of the above
15.A firm has the following balance sheet:

Cash P 20   P 20

Accounts Receivable 20   40
Inventory 20   80
Fixed Assets 180   80

      20

Sales for the year just ended were P400, and fixed assets were used at 80 percent of capacity, but its current assets were at
optimal levels. Sales are expected to grow by 5 percent next year, the profit margin is 5 percent, and the dividend payout ratio is 60
percent.
How much additional funds (AFN) will be needed?

a. P4.6
b. P(6.4) (Surplus)
c. P 2.4
d. P(4.6) (Surplus)
16.Your company has the following balance sheet (in millions of PESOs):

C tA t P40 P08
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Current Assets P 4.0   P 0.8

Net Fixed Assets 4.0   1.0

      0.2

      P 2.0
      1.5

      1.5
      3.0

Total Assets P 8.0   P 8.0

You have determined the following facts: (1) last year's sales were P10 million; (2) the company will pay out 40 percent of
earnings as dividends; (3) a profit margin of 3 percent is projected; (4) fixed assets were used to full capacity; and (5) all assets as
well as spontaneous liabilities as shown on the balance sheet are expected to grow proportionally with sales. Further, your boss
estimates she will need to raise P2 million externally by issuing new debt or common stock next year. If the above assumptions
hold, what rate of sales growth is your boss expecting? (Hint: You can use the AFN equation to help answer this problem.)

a. 0.125
b. 0.3196
c. 0.18
d. 0.2315
17.Using the AFN formula approach, calculate the total assets of Harmon Photo Company given the following information: Sales this
year = P 3,000; sales increase projected for next year = 20 percent; net income this year = P250; dividend payout ratio = 40 percent;
projected excess funds available next year = P100; accounts payable = P600; notes payable = P100; and accrued wages and
taxes = P200. Except for the accounts noted, there were no other current liabilities. Assume that the firm’s profit margin remains
constant and that the company is operating at full capacity.
a. P 3,000
b. P 2,200
c. P 2,000
d. P 1,200
18.A company had sales last year of P10 million, with net income equal to 6% of sales. This year the sales are expected to be P11.2
million. The accounts receivable balance was P1.5 million at the end of last year. Using the percentage of sales method, the
accounts receivable balance at the end of this year is forecasted to be:
a. P1.572 million
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b. P1.68 million
c. P2.172 million
d. P2.7 million
19.Brown & Sons recently reported sales of P 100 million, and net income equal to P5 million. The company has P70 million in total
assets. Over the next year, the company is forecasting a 20 percent increase in sales. Since the company is at full capacity, its
assets must increase in proportion to sales. The company also estimates that if sales increase 20 percent, spontaneous liabilities
will increase by P2 million. If the company’s sales increase, its profit margin will remain at its current level. The company’s
dividend payout ratio is 40 percent. Based on the AFN formula, how much additional capital must the company raise in order to
support the 20 percent increase in sales?
a. P 2,000,000
b. P 6,000,000
c. P 8,400,000
d. P 9,600,000

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QUIZ RESULTS
Week 13: Responsibility & Transfer Pricing

Total Questions: 60 Legend:

  Correct Chosen Answer
Your Score: 13/60   Incorrect Chosen Answer
Your Rating: 22%   Correct Answer

1. Responsibility Accounting:
a. Is the most formal communication device within an enterprise.
b. Encourages managers and other employee to achieve enterprise goals, not just their own individual goals.
c. Encourages managers to focus on a single issue of evaluation.
d. Deals with the reporting of information to facilitate control of operations and evaluation of performance.
2. In responsibility accounting a center’s performance is measured by controllable costs. Controllable costs are best described as
including:
a. Differential costs
b. Only those costs that the manager can influence in the current time period
c. Incremental and fixed costs
d. Only discretionary costs
3. When used for performance evaluation, the generated reports in a responsibility accounting system should
a. Not be related to the organization structure
b. Not include variances between actual results and budgeted amounts of controllable costs
c. Not distinguish between controllable and non-controllable costs
d. Not include allocated fixed manufacturing overhead MNL-22-1413
4. Which one of the following measures of corporate performance does not consider the value of assets used to generate the
income that is being measured?
a. Return on investment
b. Economic value-added
c. Residual income
d. Return on sales
5. In a company with a centralized approach to responsibility accounting, upper-level managers typically
a. make key decisions only
b. implement key decisions only
c. both make and implement key decisions
d. review the outcomes of key decisions only
6. Why would a company decentralize?
a. to train and motivate division managers
b. to focus top management’s attention to operating decisions
c. to allow division managers to concentrate on strategic planning
d. all of the above
7. Advantages of decentralization include all of the following except
a. divisional management is able to react to changing market conditions more rapidly than top management
b. divisional management is a source of personnel for promotion to top management positions
c. decentralization can motivate divisional managers
d. decentralization permits divisional management to concentrate on company-wide problems and long-range planning
8. Goal congruence is most likely to result when
a. reports to managers include all costs
b. managers’ behavior is affected by the criteria used to judge their performance
performance evaluation criteria encourage behavior in the company’s best interests as well as in the manager’s best
c. interests
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d. a manager knows the criteria used to judge his or her performance

9. Which of the following is critically important for a responsibility accounting system to be effective?
a. Each employee should receive a separate performance report.
b. Service department costs should be allocated to the operating departments that use the service.
c. Each manager should know the criteria used for evaluating his or her performance.
d. The details on the performance reports for individual managers should add up to the totals on the report to their supervisor.
10.A responsibility center
a. is an organization unit where management control exists over incurring costs or generating revenue
b. is responsible for all other departments
c. has a responsible manager in charge of it
d. all of the above
11.Cost centers in a responsibility accounting system
a. will organize the company into the smallest units of activity – the individual worker
b. will have a specific manager in charge of every cost center
c. should have the same code number for similar units wherever they appear in an organization
d. should show the contribution margin in its control report
12.Controllable costs are costs that
a. fluctuate in total in response to small changes in the rate of capacity utilization.
b. will be unaffected by current managerial decisions.
management decides to incur in the current period to enable the company to achieve objectives other than filling
c. customers’ orders.
d. are likely to respond to the amount of attention devoted to them by a specified manager.
13.Robert Cruz is the manager of Division B of a large manufacturing company. Division B purchases all of its direct materials from
Division A at a negotiated transfer price. Division B manufactures a product and sells this product on the market. Robert Cruz
makes all production efficiency decisions for the division, including replacing and upgrading manufacturing equipment. The
above represents which of the following types of responsibility center?
a. Cost center
b. Revenue center MNL-22-1413
c. Profit center
d. Investment center
14.To properly motivate divisional management, the divisional ROIs should be
a. Equal
b. Greater in the less profitable divisions to motivate those divisions to achieve higher ROIs
c. Lower in more profitable divisions in which motivation is necessary
d. Different based upon strategic goals of the firm
15.Using residual income for evaluating performance
a. penalizes managers whose segments have low ROIs
b. penalizes managers of relatively large segment
c. encourages managers to maximize pesos of profit after a required ROI has been achieved
d. encourage managers to maximize ROI for the company
16.In contrast to residual income (RI), economic value added (EVA) uses:
a. the firm's minimum rate of return instead of its cost of capital.
b. the firm's cost of capital instead of its minimum rate of return
c. a required rate of return.
d. values determined by using conventional accounting policies
17.The general rule in establishing transfer prices consistent with economic decision making is the
a. differential cost-plus opportunity cost if goods are transferred internally.
b. actual cost-plus opportunity cost if goods are transferred internally.
c. standard cost-plus opportunity cost if goods are transferred internally.
d. all of the above.
18.The objective(s) of transfer pricing are
a. to motivate managers
b. to provide an incentive for managers to make decisions consistent with the firm's goals (i.e., goal congruence)
c. to provide a basis for fairly rewarding the managers
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d. all of the above

19.
A selling division produces components for a buying division that is considering accepting a special order for the products it
produces. The selling division has excess capacity. The minimum price the selling division would be willing to accept is the
a. selling division’s variable costs
b. buying division’s outside purchase price
c. price that would allow the buying division to cover its incremental cost of the special order
d. price that would allow the selling division to maintain its current ROI
20.Generally, the outside market price would be
a. a floor for internal transfer price
b. a ceiling for internal transfer price
c. both a and b
d. none of the above.
21.If a firm operates at capacity, the transfer price should be the:
a. external market price.
b. actual cost.
c. differential cost.
d. standard cost.
22.If full cost is used in transfer pricing, it is preferable to use
a. standard full cost because the buyer does not wish to be stuck with unknowns
b. standard full cost because the seller does not wish to pass along the variations in cost
c. actual full cost because the buyer is well-advised to deal with the real rather than anticipated costs
d. actual full costs because the seller is well-advised to deal with the real rather than anticipated costs
23.A negotiated transfer pricing system is set up where
a. the two sides cannot agree on a price and the difference between the two sides is absorbed by the home office
b. a ready market price is not available and the two sides must come up with an agreeable price
c. the buyer buys at variable cost and the seller only sells at full cost
d. the two sides agree to use a cost basis for transfer pricing MNL-22-1413
24.A company may consider using variable costs in transfer pricing when there is
a. excess capacity because variable costs would stay the same
b. no excess capacity because variable costs would not stay the same
c. excess capacity because fixed costs would stay the same
d. no excess capacity because fixed costs would stay the same
25.The invested capital employed turnover rate could include
a. Invested capital in the denominator
b. Invested capital in the numerator
c. Net Income in the numerator
d. Sales in the denominator
26.Profit centers
a. Have responsibility for controlling costs as well as revenues
b. Control and report costs only
c. Are the same as investment centers
d. Measure income and relate that income to their invested capital
27.Which of the following types of responsibility centers has accountability for Revenues
a. Cost and Investment Centers
b. Cost and Profit Centers
c. Profit and Investment Centers
d. Expense and Investment Centers
28.A Company has two Divisions, A and B, each operated as a profit center. A charges B P35 per unit for each unit transferred to B.
Other data follow:

A’s variable cost per unit P           30

A’s Fixed Costs P     10,000
A’s annual sales to B 5,000 units
A’s sales to outsiders 5,500 units

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A is planning to raise its transfer price to P50 per unit. Division B can purchase units at P40 each from outsiders but doing so
would idle A’s facilities now committed to producing units for B. Division A cannot increase its sales to outsiders. From the
perspective of the company as a whole from whom should Division B acquire the units, assuming B’s market is unaffected?

a. Outside vendors
b. Division A, but only at the variable cost per unit
c. Division A, but only until fixed costs are covered, then should purchase from outside vendors
d. Division A, in spite of the increased transfer price.
29.Boomster, Inc. generated the following result for the period just ended:

Sales P 1.0 million

Net Income 0.1 million
Capital Investment 0.5 million
To arrive at the return on investment, the following should be used:

a. ROI = (5/10) x (10/1)

b. ROI = (10/5) x (10/1)
c. ROI = (5/10) x (1/10)
d. ROI = (10/5) x (1/10)
30.Nita Corp.’s Department 1 produced component C that is used by OZM as a key part. Production and Sales data for the component
C is as follows:

Selling price per unit P100

Variable Cost per unit 36
Fixed Cost per unit (Based on 10,000 capacity per annum) 24

Nita Corp.’s Department 2 is introducing a new product that will use component C. AN outside supplier has quoted Department 2
a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Department 2’s
requirements. The company has transfer price formula of: Transfer Price = Variable cost per unit + Lost Contribution Margin per
unit on Outside Sales
Department 1 has enough excess capacity to handle all of Department 2’s needs. For the overall interest of
the company, Department 1 should: MNL-22-1413
a. Sell to Department 2 at the same quoted price of P96 per unit
b. Sell to Department 2 at minimum price of P60 per unit.
c. Not sell to Department 2 since it will lose P4 per unit.
d. Sell to Department 2 at P100 per unit.
31.Games Corp. expected to sell 150,000 board games for July. Its master budget related to the sale and production of these items is
presented below:

Revenue P  480,000
Cost of Goods Sold  
     Direct Materials 135,000
     Direct Labor 60,000
     Variable overhead 90,000
Contribution Margin 195,000
Fixed Overhead 50,000
Fixed Selling and Administrative 100,000
Operating Income P   45,000

July’s sales registered at 180,000 board games. Using a flexible budget the company expects the operating income for the month
of July to be:

a. P 102,000
b. P 270,000
c. P 84,000
d. P 45,000
32.Broker Corporation’s budget shows straight-line depreciation on machinery of P 516,000 based on the annual production volume
of 130,200 units of product. In July, it produced 8,170 units of product, and the accounts had actual depreciation on machinery of
P 41,000. It controls manufacturing costs with a flexible budget. The flexible budget for the depreciation of the machine for July
is:
a. P 38,950
b. P 43,000
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c. P 41,000
d. P 40,850
33. The First Division of Furrow Company produces Part 1 that is used by OEN’s as a key part in their products. Costs and sales data
on Part 1 are as follows:

Selling price per unit P100

Variable Cost per unit 60
Fixed Cost per unit (Based on 40,000 capacity per 24
annum)

Furrow Company’s Second division is introducing a new product that will use Part 1. An outside supplier has quoted Second
Division a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Second
Division. The First Division is currently operating at capacity. If the Second Division would buy 15,000 units from the First Division,
the effect on the corporate profits would be:

a. Increase by P 240,000
b. Increase by P 210,000
c. Increase by P 1,500,000
d. Reduced by P 60,000
34.The manager of the Cement Division expects the following results in 2013:

Sales P    49,600,000

Variable Costs (60%)   29,760,000
Contribution Margin 19,840,000
Fixed Costs 12,000,000
Profit P 7,840,000

The Division’s investments are as follows:

Plant Equipment P19,510,000

Working Capital 14,880,000
ROI 22.8%

The division has a target ROI of 30 percent, and the manager has asked you to determine how much sales volume the division
would need in order to realize that. He states that the sales mix is relatively constant so variable costs should be close to 60

MNL-22-1413
percent of sales, fixed costs and plant and equipment should remain constant, and working capital should vary closely with sales
in the percentage reflected above. The peso sales that the division needs in order to realize the 30 percent ROI target is:

a. P 19,829,032
b. P 44,373,871
c. P 57,590,322
d. P 59,510,000
35.The following data relate to the White Division of Colgate Company:

Sales P 10,000,000
Variable Costs 3,000,000
Direct Fixed Costs 5,000,000
Invested Capital 8,000,000
Allocated Actual Interest Costs 800,000
Capital Charge 12%

The divisional return on investment is:

a. 0.15
b. 0.13
c. 0.25
d. 0.2
36.The Engine Division provides motors for the Auto Division of a Company. The standard unit costs for Engine Division are as
follows:

Market Price P 45,500

Direct Materials 10,000
Direct Labor 20,000
Variable Overhead 5,000
Fixed Overhead 2,500

What is the best transfer price to avoid transfer price problems?

a. P 45,500
b. P 30,000
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b. 30,000
c. P 35,000

d. P 37,500
37.37. The following selected data for BC Company for 2020:

Sales P 2,000,000
Variable Costs 1,200,000
Traceable Fixed Costs 200,000
Average Invested Capital 400,000
Capital Charge 15%
The residual income amounted to:

a. P 200,000
b. P 540,000
c. P 600,000
d. P 660,000
38.Assuming the same information in the previous item, the return on investment percentage is
a. 0.75
b. 1.35
c. 1.5
d. 2
39.Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication
Division has excess capacity of 5,000 units with respect to the UT-371 circuit board, a popular item in many digital applications.
Information about the circuit board follows.

Market Price P 48
Variable selling/distribution costs on external sales 5
Variable Manufacturing Costs 21
Fixed Manufacturing Costs 10

Manhattan’s Electronic Assembly Division wants to purchase 4,500 circuit boards either internally, or else use a similar board in

MNL-22-1413
the marketplace that sells for P46. The Electronic Assembly Division’s management feels that if the first alternative is pursued, a
price concession is justified, given that both divisions are part of the same firm. To optimize the overall goals of Manhattan, the
minimum price to be charged for the board from the Fabrication Division to the Electronic Assembly Division should be

a. P21
b. P26
c. P31
d. P46
40.Performance results for four geographic divisions of a manufacturing company are shown below.

Division Target ROI Actual ROI Return on Sales

A 18% 18.1% 8%
B 16% 20% 8%
C 14% 15% 6%
D 12% 11% 9%

The division with the best performance is

a. Division A
b. Division B
c. Division C
d. Division D
41.KHD Industries is a multidivisional firm that evaluates its managers based on the return on investment (ROI) earned by their
divisions. The evaluation and compensation plans use a targeted ROI of 15% (equal to the cost of capital) and managers receive
a bonus of 5% of basic compensation for every one-percentage point that the division's ROI exceeds 15%. David Evans, manager
of the Consumer Products Division, has made a forecast of the division's operations and finances for next year that indicates the
ROI would be 24%. In addition, new short-term programs were identified by the Consumer Products Division and evaluated by the
finance staff as follows.

Program Projected ROI

A 13%
B 19%
C 22%
D 31%
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D 31%

Assuming no restrictions on expenditures, what is the optimal mix of new programs that would add value to KHD Industries?

a. A, B, C and D
b. C and D only
c. B, C and D only
d. D only
42.The following selected information is from the financial statements of Bishop Corporation for the last fiscal year.

Current Assets P 500,000

Fixed Assets 250,000
Current Liabilities 100,000
Long-Term Debt 300,000
Shareholders’ Equity 350,000
Operating Profit 1,000,000
Income Taxes 400,000
Net Income 600,000

Bishop has a cost of capital of 10%. The company's economic value added (EVA) for last year was

a. P 535,000
b. P 570,000
c. P 935,000
d. P 970,000
43.Channing Company has two divisions, S and T. The company's overall contribution margin ratio is 30% when sales in the two
divisions total P 750,000. If variable expenses are P 450,000 in Division S, and if Division S's contribution margin ratio is 25%,
then sales in Division T must be:
a. P 75,000
b. P 150,000
c. P 225,000
d. P 300,000

MNL-22-1413
44.Bennett Company has two stores, P and Q. During April, Store P had a segment margin of P 8,000 and variable expenses equal to
65% of sales. Traceable fixed expenses for Store Q were P 18,000. Bennett Company as a whole had a contribution margin ratio of
40%, a combined segment margin of P 20,000, and sales of P 180,000. Given this data, the sales for store Q were:
a. P 157,143
b. P 60,000
c. P 30,000
d. P 120,000
45.Cabot Company had the following results during June: net operating income, P 2,500; turnover, 4; and ROI, 20%. Cabot Company's
average operating assets were:
a. P 50,000
b. P 200,000
c. P 12,500
d. P 10,000
46.The following information relates to last year's operations at the Paper Division of Germane Corporation:

Minimum Required Rate of Return 15%

Return on Investment 18%
Sales P 810,000
Turnover (on operating assets) 5 times

What was the Paper Division's net operating income last year?

a. P 24,300
b. P 29,160
c. P 145,800
d. P 162,000
47.The following information relates to last year's operations at the Bread Division of Rison Bakery, Inc.:

Residual Income P 12,000

Net Operating Income 60,000
Sales 300,000
Average Operating Assets 400,000

Wh t th B d Di i i '
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What was the Bread Division's minimum required rate of return last year?

a. 0.12
b. 0.04
c. 0.15
d. 0.2
48.Item 48 to 50 are based on the following information: Division T of Clocker Company makes a timer which it sells for P30 to
outside customers. The division has supplied the following data concerning the timer:

Monthly Capacity 12,000 timers

Variable cost per unit P 15
Fixed Cost per unit P 10

Presently, Division S of Clocker Company is currently buying 5,000 similar timers each month from an overseas supplier at P27
each. Division S would like to acquire its timers from Division T if the price is right. Suppose Division T is operating at capacity
and can sell all of the timers it produces to outside customers at its usual selling price. What is the lowest acceptable transfer
price from the viewpoint of the selling division?

a. P30
b. P27
c. P25
d. P15
49.Suppose Division T is operating at capacity and can sell all of the timers it produces to outside customers at its usual selling
price. If Division T meets the price of the overseas supplier and sells 5,000 timers to Division S each month, the effect on the
monthly net operating income of the company as a whole will be:
a. increase of P 15,000
b. decrease of P 15,000
c. decrease of P 60,000
d. increase of P 10,000
50.Suppose that Division T can sell only 10,000 timers to outside customers. What is the lowest acceptable transfer price from the
viewpoint of the selling division? MNL-22-1413
a. P24
b. P27
c. P30
d. P15
51.Items 51 to 53 are based on the following information:

Division 1 of Ace Company makes and sells wheels that can either be sold to outside customers or transferred to Division 2. The
following data are available from last month:

Division 1:

Selling price per wheel to outside customers P50

Variable cost per wheel when sold to outside customers 35
Capacity in wheels 15,000
Division 2:

Number of wheels needed per month 5,000

Price per wheel paid to an outside supplier P47

If Division 1 sells the wheels to Division 2, Division 1 can avoid P2 per wheel in sales commissions. Suppose that Division 1 sells
7,500 units per month to outside customers. What is the lowest acceptable transfer price from the viewpoint of the selling division
if Division 2 requires 5,000 units per month from Division 1?

a. P33
b. P35
c. P47
d. P50
52.What is the maximum price per wheel that Division 2 should be willing to pay Division 1 if a transfer were to take place?
a. P33
b. P35
c. P47
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d. P50
53.
Suppose that Division 1 sells 11,500 units each month to outside customers. What is the lowest acceptable transfer price from the
viewpoint of the selling division?
a. P47
b. P43.50
c. P37.50
d. P34.73
54.Domingos Company has two product lines, C and J. Line C has sales of P 100,000 during March, a segment margin ratio of 19%,
and traceable fixed expenses of P 20,000. The company as a whole had a contribution margin ratio of 25% and P 105,000 in total
contribution margin. Based on this information, total variable expenses for product J must have been:
a. P 61,000
b. P 176,000
c. P 315,000
d. P 254,000
55.The Valve Division of Industrial Company produces a small valve that is used by various companies as a component part in their
products. Industrial Company operates its divisions as autonomous units, giving its divisional manager great discretion in pricing
and other decisions. Each division is expected to generate a rate of return of at least 14 percent on its operating assets. The Valve
Division has average operating assets of P700,000. The valves are sold for P5 each. Variable costs are P3 per valve, and fixed
costs total P462,000 per year. The Division has a capacity of 300,000 units. How many valves must the Valve Division sell each
year to generate the desired rate of return on its assets?
a. 280000
b. 355385
c. 350000
d. 265000
56.Marsh Company currently has operating assets of one million and net income of P200,000. Marsh had an opportunity to invest in
a project that requires an additional investment of P250,000 and increased net income by P40,000. After the investment, the
company's ROI will be
a. 0.16 MNL-22-1413
b. 0.192
c. 0.18
d. 0.202
57.Megastars Division of Expenditures Company expects the following results for 2020:

Unit Sales 70,000 units

Unit Selling price P 10
Unit Variable cost 4
Total Fixed Cost P 300,000
Total Investments 500,000
The minimum required ROI is 15 percent, and divisions are evaluated on residual income. A foreign customer has approached
Megastars’ manager with an offer to buy 10,000 units at P7 each. Megastars Division has capacity of 75,000 units and the
foreign customer will not accept fewer than 10,000 units. Accepting the order would increase fixed costs by P10,000 and
investment by P40,000. At the price of P7 offered by foreign customer, what is the maximum number of units in regular sales that
Megastars Division could sacrifice and still maintain its expected residual income?

a. 2333
b. 3333
c. 2667
d. 3667
58.Consider the following:

Investment center’s after-tax operating P 50,000

profit
Investment center’s total assets 800,000
Investment center’s current liabilities 80,000
Weighted average cost of capital 6.5%
What is the economic value added (EVA)?

a. P60,000
b. P 6,000
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c. P 3,200
d. P50,000
59. Marsh Company that had current operating assets of one million and net income of P200,000 had an opportunity to invest in a
project that requires an additional investment of P250,000 and increased net income by P40,000. The company's required rate of
return is 12%. After the investment, the company's residual income will amount to
a. P 80,000
b. P 90,000
c. P 85,000
d. P 95,000
60.Bearing Division of Phantom Corp. sells 80,000 units of Part X to the outside market. Part X sells for P10.00 and has a variable
cost of P5.50 and a fixed cost per unit of P2.50. Bearing has a capacity to produce 100,000 units per period. Motor Division
currently purchases 10,000 units of Part X from Bearing for P10.00 per unit. Motor was approached by an outside supplier willing
to supply Part X for P9.00 per unit. What is the effect on XYZ’s overall profit if Bearing refuses to meet the outside supplier’s price
and Motor decides to buy outside?
a. no change
b. P20,000 decrease in Phantom profits
c. P35,000 decrease in Phantom profits
d. P10,000 increase in Phantom profits

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