SMst ane revenue funds: 4. cost, revenue and investment 50. Responsibility accounting revolves around the concept that: &. someone has to be made responsible for all costs. b. responsibility for accounting numbers belong, © each manager's performance should directly under her control. d. The manager in charge of a particular cost center should be responsible for those costs which relate directly to her department's operations, to the accounting department. be judged by how well she manages those items II. MULTIPLE CHOICE PROBLEMS Encircle the letter that corresponds to the best answer of the following problems. 1, The segment manager of the Aristocrat Restaurant is considering two possible expansion alternatives. The required investments, expected controllable margins, and the ROIs of each are as follows: Controllable Projects | Investment | Margin ROL A 120000 30000 25% B 540000 50000 9.25% A‘tte amen Acuna ad Pranayama #2 [Bie Segment has currently P2000.000 in invested capital and a controllable margin of 250M. Which one of aon projec wl increase the seers ROT? ‘Both the Aand B options '. Only the A option © Only the B option 4. Neither the A no the B options 2 Buggy Manufacturing Company prepared a fixed budget of 40000 direc labor hours, with cstinted vera oof PND for varie oveba and PDO for fed ‘overhead. The company then prepared a flexible budget at 38,000 labor hours. How ‘much s total overhead costs at this level of activity? a. P190,000 . P250,000 © P7000 . P260,000 3. Carter Watch Corporation recorded operating data for ts Watch division forthe year. The ‘company requires is return tobe 10%. ‘Sales P7000 Controllable margin 80,000 Total average assets 2000,000 Fixed costs 50,000 How much is ROL forthe year? a 4% b. 35%, . 6% 15% ‘4. Daniel Company budgeted manufacturing costs for 2500 units are: Fixed manufacturing costs 'P25,000 per month ‘Variable manufacturing costs P1200 per unit ‘The company’s produced 2000 units during March. How much is the flexible budget for total manufacturing cost for March? a. F260,000 b. F325 000 © P2400 a. P265,000 European divsion’s operating results include: controllable margin of P150000, sales {otaling P1,200,00; and average operating assets of P500,00, The division is considering a Projet with sales of 100,00, expenses of FBG 000, and an investment of average pean sects of F200000, Ts required rate of retum is 9%. Should itacept thisgeste RAeseonsblty Accounting and Peromence Messums &: es ROL wil drop by 6.6% which is sil above the required rate of return ’. Noy the returns less than the required rate of 9%. & Yes, ROI sil exceds the cost of capital 4. No, ROI will decrease to 75. 4 Father Fan Manufacturing reported the allowing items or 207 ne Sa, ” 2 aoe, om area mn Total operating assets 325,000 sy ne kG POD tie ay ime 1, Garland Shells Manufacturing prepared a 2007 budget for 0,000 units of product. Actual production in 2007 was 41,000 units. Which one of the following is the most useful comparison for this company? ‘The actual results for 42,000 units with anew budget for 41,000 units. '. The actual results for 41,000 units with the original budget for 40,000 units. © The actual results for 41,000 units with the previous year’s actual results for 4,000 units. dd. Itdoesn’t matter. Alllof these choices ae equally useful, {Helmet & Boots Company’s master budget shows thatthe planned activity level for next years expected tobe 20,000 machine hours, At his level of activity, the following ‘manufacturing overhead cost are expected: Indirect labor "sam Factory supplies Indirect materials noo Depreciation on factory building 15,000 Total manufacturing overhead om the company operates at 21,000 machine hours, how much s allowed ona flexible budget for manufacturing overhead costs? a. P89250 b. P73500 © P88.500 4. P85;000 9A department overhead eos of P40,000 ps PS per A ‘has budgeted monthly manufacturing dizect labor hour The eae bade cpr act PDD fra nei ‘manufacturing cost for the month. Wha | level of activity achieved during ‘month? ‘4, 32,000 direct labor hours 1. 24,000 direct labor hours ,hater sznsblly Acting ad Psomane Mesures tt 16,000 diret labor hours 4, Canmot be determined 10, Given below isa portion ofa division's management performance report Budget Actual Difference Contribution margin P1,040,000P1,020,000 20,000 Controllable fixed costs 430,000 420,000 10,000 Which statement ist about the manager’ overal performance? 2 Themanagers performances above expetatios B Themamgerspformanntiw gece © Themanager was under budge onl cenolble amount 41. The managers overall perfomance cannot be determined fom information gen 1, Genbebw sanesc roma maragaent erormance report for prof center sr Budget ‘Actual Difference Coniitasonnargin Pethono Foo Paton Cnolefaedcoss Pamoon) P20 Paton ow wal the manage pro oe? att low eects POU bow pectons Equal The ROI eto known frat asaent nose 12 Merck Pharmaceuticals is evaluating its Multivitamins division, an investment center. ‘The division has a P45,000 controllable margin and P300,000 of sales. How much will the ‘company’s average operating assets be when its return on investment is 10%? a. Ps50,000 ». 495,000 ©. 300,000 4. 255,000 13. The following information is available for Starex Auto Sales: ‘Average operating assets P800,000 Controllable margin 80,000 Contribution margin 200,000 Minimum rate of return 8% How much isthe company’s residual income? a. 136,000 b, P720,000 © P1600 4. P5400 14, Safety Belts Company recorded ating data for its belt divi companys deateh ree! SPAR division for the year. ThepececRFiemonnstit Accowinc and Perormance Momus cag Sales 00,000, ‘Conteibution margin 100,000 Total direct fixed costs 60000 ‘Average total operating asets 200,000 Wich ove he following reflects the controllable magia forthe year? * b 50% < P3000 a) 15, Safety Seats Company recorded. data for its seats division forthe yea. The company's dered retum aS. Pe me Sales 500,000 Contribution margin 100.000 ‘Total direct fixed costs 60000 Average total operating assets 200,000 Teun ROLF the year management i able o enya way to improve the contention margin by P2000 assuming fixed costs are held covtan b 2x © O% a Division A. 269% Division B 15% ‘Which of the following should the company choose? Division A. b. Division B 1 Frame Ine. requires a return for Pcture Division totaling 8%. Which projects ‘would add value tothe company? Average Controle Project Operating ‘Ascets Margin A 500,000, P4000 B 'P450,000 0.000 c 'P975,000 32,000 D ‘425,000 ‘P0000 a. ABGandD B. Projects A,C, and D Projects Cand D 4. Project A,B, and D16, The current controllable margin for Clarenett Divison is P62,00. Is current operating » a. ‘assets are P200,00. The division is considering purchasing equipment for P60,000 that will increase annal controllable margin by an estimated P10,000. If the equipment is, purchased, what will happen tothe return on investment forthe division? . Anincrease of 161% B.A decrease of 133% © A decrease of 33% A decrease of 72% Richie Rich Corporation recorded operating data for its Golf Course division for the year. The company requires its return to be 9%. Sales 500,000, Controllable margin 90,000 Total average assets 300,000 Fixed costs 30,000 Residual income 0,000 How much is ROI for the year? 2 10% b 167% © 0% 4. 30%, ‘Using the data of Richie Rich and suppose the division experiences an increase of 'P50,00 in controllable fixed costs. Will the new ROI be acceptable? Yes. The ROI will remain at 30% which exceeds the required ROL. '. Yes. The new ROI isstil above the required ROL No. The ROI drops toless than 5%, 4. There isnot enough information to determine. ‘The manager of a division is evaluated by executive management based on Division's ROL The curent controllable margin of the division is P46,00. Is current operating ‘assets total P210,000. The Division is considering purchasing equipment for P40,000 ‘that will increase sales by an estimated P10,000, with annual deprecation of P10,000 If the equipment is purchased, what will happen to the return on investment for the division? a An increase of 05% B.A decrease of 05% cA decrease 0f 35% 4. twill remain unchanged (Onford Company earned controllable margin of P125,000 on sales of P1,600,000. The division had average operating assets of P1,300,000, The company requires a retum on investment of atleast 8%, How much is residual income? a. P104,000 b. P2000 < P146,000 4. P128,000‘pace esconstiy Accounting and Patomance Menus aT B.A division of Paul Company's operating results include: controllable margin, P200,000; sales 2.200000; and operating. assets, PAOD (00, The Division's ROI is 25%. Management is considering a project with sales of F100,00, variable expenses of 60,000, fixed costs of 40,000; and an asset investment of 150,000. Should ‘management accep this new project? a. No,since ROL willbe lowered , Yes, since ROL will increase. Yes, since additonal sales always mean more customers. 4. No, since loss will be incured. 24. James Manufacturing Company reported the following information at the end of its ‘ost recent fisal year are: Sales, P90,000; Net operating income, 3,600; Operating assets, P30,000; Stockholders’ equity, P25,000; Minimum required rate of return, 10%; ‘The company’s residual income was: a. P1100 b P5400 F360 4. F600 25. Using the same data in James Manufacturing Company, the return on investments is, a 4% b 144% © 1% . 18% Use the following data for next 2 items: A ‘center which is accounted for as an investment center hhad sales forthe period of P10,000,00. Cost of goods sold amounted to P7,000,00, while all other expenses totaled 50% of gross margin. To produce its income the ‘investment center employed P15,000,000 worth of assets. 26, Assuming a 9% minimum required rate of return, residual income would be: 450,000 150,000 600,000, 800,000 pose 27. The retum on investment would be: ‘a. 10% b. 12% 15% d. 20% the following information (in thousands of pesos): 28 Jenny Company reports the following information th Pio Piso F250 SE nwo et Segment margin PAO P2750——] ‘tate Assonsiy cont and Promance Maung 208 1f total fxed costs are P100,000, what is the amount of comman fixed costs? a P6750 b. Peo © Pa P75 29. The segmented income statement of Joy, In. showed the following: Ai BH Total Sales P2000 P40}000 6,000, Variable costs 8000 12000 20000 You have learned the following: ‘thatthe company rents a building for P60 per year thats used to produce and sell both products ‘+ that Product Ail required 10% ofthat building and Product ii uses 40% and the remainder ofthe building is sales and office space fo the company; and +__thatit cots F300 to advertise product Ai an PA,00to advertise Product Bi ‘Based on these facts the segment margin foreach product would ber Product Ail Product Bil a P5000 P8000 b P9000 P2400 < P1300 P2000 4 P1700 P6000 50. Young Company manufactures and sels a single product which has an economy and Jury model. The following data are availabler Economy Luxury Selling price P40 100 Variblecosts 60% 40%