POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY
ACCO 3133 Management Accounting, Part 2, Mid-Term Examination
August 18, 2013
Instructions: Choose the BEST answer for each of the following items. For all questions requiring
solutions, show your computations in a separate worksheet provided.
Theory 1-40 (1 point each); Problem 41-70 (2 points each)
1. A segment of an organization is referred to as a service center if it has
a. Authority to provide specialized support to other units within the organization.
b. Responsibility for combining the raw materials, direct labor, and other factors of
production into a final output.
c. Authority to make decisions affecting the major determinants of profit including the
power to choose its markets and sources of supply.
d. Responsibility for developing markets and selling the output of the organization.
2. The least complex segment or area of responsibility for which costs are allocated is a(n)
a. Investment center.
b. Contribution center.
c. Cost center.
d. Profit center.
3. In theory, the optimal method for establishing a transfer price is
a. Budgeted cost with or without a markup.
b. Market price.
c. Flexible budget cost.
d. Incremental cost.
4. Under a standard cost system, the materials price variances are usually the responsibility of the
a. Production manager.
b. Cost accounting manager.
c. Purchasing manager.
d. Sales manager.
5. The purpose of identifying manufacturing variances and assigning their responsibility to a
person/department should be to
a. Use the knowledge about the variances to promote learning and continuous
improvement in the manufacturing operations.
b. Determine the proper cost of the products produced so that selling prices can be adjusted
accordingly.
c. Pinpoint fault for operating problems in the organization.
d. Trace the variances to finished goods so that the inventory can be properly valued at
year-end.
6. Which of the following techniques would be best for evaluating the management performance of
a department that is operated as a cost center?
a. Return on assets ratio
b. Payback method
c. Return on investment ratio
d. Variance analysis
7. Sherman Company uses a performance reporting system that transfer price is that the method
used will stimulate the department managers both selling and buying reflects the
company's decentralization of decision making. The departmental performance report shows
one line of data for each subordinate who reports to the group vice president. The data
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presented show the actual costs incurred during the period, the budgeted costs, and all variances
from budget for that subordinate's department. Sherman is using a type of system called
a. Responsibility accounting.
b. Flexible budgeting.
c. Contribution accounting.
d. Cost-benefit accounting.
8. The segment margin of an investment center after deducting the imputed interest on the assets
used by the investment center is known as
a. Return on assets.
b. Operating income.
c. Residual income.
d. Return on investment.
9. Decentralized firms can delegate authority and yet retain control and monitor managers'
performance by structuring the organization into responsibility centers. Which one of the
following organizational segments is most like an independent business?
a. Profit center
b. Investment center
c. Cost center
d. Revenue center
10. The Eastern division sells goods internally to the Western division of the same company. The
quoted external price in industry publications from a supplier near Eastern is P200 per ton plus
transportation. It costs P20 per ton to transport the goods to Western. Eastern's actual market
cost per ton to buy the direct materials to make the transferred product is P100. Actual per ton
direct labor is P50. Other actual costs of storage and handling are P40. The company president
selects a P220 transfer price. This is an example of
a. Cost plus 20% transfer pricing.
b. Cost-based transfer pricing.
c. Negotiated transfer pricing.
d. Market-based transfer pricing.
11. Which of the following is not true about international transfer prices for a multinational firm?
a. Allows the firm to evaluate each division.
b. Allows firms to correctly price products in each country in which it operates.
c. Allows firms to attempt to minimize worldwide taxes.
d. Provides each division with a profit-making orientation.
12. A segment of an organization is referred to as a profit center if it has
a. Authority to make decisions affecting the major determinants of profit including
power to choose its markets and sources of supply.
b. Authority to make decisions affecting the major determinants of profit including
power to choose its markets and sources of supply and significant control over
amount of invested capital.
c. Authority to provide specialized support to other units within the organization.
d. Authority to make decisions over the most significant costs of operations including
power to choose the sources of supply.

the
the
the

the

13. The inventory control supervisor at Wilson Manufacturing Corporation reported that a large
quantity of a part purchased for a special order that was never completed remains in stock. The
order was not completed because the customer defaulted on the order. The part is not used in
any of Wilson's regular products. After consulting with Wilson's engineers, the vice president of
production approved the substitution of the purchased part for a regular part in a new product.
Wilson's engineers indicated that the purchased part could be substituted providing it was
modified. The units manufactured using the substituted part required additional direct labor
hours resulting in an unfavourable direct labor efficiency variance in the Production Department.
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The unfavorable direct labor efficiency variance resulting from the substitution of the purchased
part in inventory would best be assigned to the
a. Sales manager.
b. Inventory supervisor.
c. Production manager.
d. Vice president of production.
14. David Rogers, purchasing manager at Fairway Manufacturing Corporation, was able to acquire a
large quantity of raw material from a new supplier at a discounted price. Marion Conner,
inventory supervisor, is concerned because the warehouse has become crowded and some
things had to be rearranged. Brian Jones, vice president of production, is concerned about the
quality of the discounted material. However, the Engineering Department tested the new raw
material and indicated that it is of acceptable quality. At the end of the month, Fairway
experienced a favorable materials usage variance, a favorable labor usage variance, and a
favorable materials price variance. The usage variances were solely the result of a higher yield
from the new raw material. The favorable materials price variance would be considered the
responsibility of the
a. Vice president of production.
b. Engineering manager.
c. Purchasing manager.
d. Inventory supervisor.
15. Under a standard cost system, the materials efficiency variances are the responsibility of
a. Sales and industrial engineering.
b. Purchasing and industrial engineering.
c. Purchasing and sales.
d. Production and industrial engineering.
16. One department of an organization, Final Assembly, is purchasing subcomponents from another
department, Materials Fabrication. The price that will be charged to Final Assembly by Materials
Fabrication is to be determined. Outside market prices for the subcomponents are available.
Which of the following is the most correct statement regarding a market-based transfer price?
a. Marginal production cost transfer prices provide incentives to use otherwise idle capacity.
b. Overall long term competitiveness is enhanced with a market-based transfer price.
c. Corporate politics is more of a factor in a market-based transfer price than with other
methods.
d. Market transfer prices provide an incentive to use otherwise idle capacity.
17. Parkside Inc. has several divisions that operate as decentralized profit centers. Parkside's
Entertainment Division manufactures video arcade equipment using the products of two of
Parkside's other divisions. The Plastics Division manufactures plastic components, one type that
is made exclusively for the Entertainment Division, while other less complex components are sold
to outside markets. The products of the Video Cards Division are sold in a competitive market;
however, one video card model is also used by the Entertainment Division. The actual costs per
unit used by the Entertainment Division are presented below.
Plastic
Video Cards
Components
Direct materials

P1.25

P2.40

Direct labor

2.35

3.00

Variable overhead

1.00

1.50

Fixed overhead

0.40

2.25

Total
P5.00
P9.15
The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the
proprietary plastic component made for the Entertainment Division would sell for P6.25 per unit
on the open market. The market price of the video card used by the Entertainment Division is
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P10.98 per unit. Assume that the Plastics Division has excess capacity and it has negotiated a
transfer price of P5.60 per plastic component with the Entertainment Division. This price will
a. Motivate both divisions as estimated profits are shared.
b. Demotivate the Plastics Division causing mediocre performance.
c. Cause the Plastics Division to reduce the number of commercial plastic components it
manufactures.
d. Encourage the Entertainment Division to seek an outside source for plastic components.
18. When using a contribution margin format for internal reporting purposes, the major distinction
between segment manager performance and segment performance is
a. Direct variable costs of producing the product.
b. Direct fixed cost controllable by others.
c. Unallocated fixed cost.
d. Direct fixed cost controllable by the segment manager.
19. A limitation of transfer prices based on actual cost is that they
a. Charge inefficiencies to the department that is transferring the goods.
b. Can lead to suboptimal decisions for the company as a whole.
c. Lack clarity and administrative convenience.
d. Must be adjusted by some markup.
20. Overtime conditions and pay were recently set by the personnel department. The production
department has just received a request for a rush order from the sales department. The
production department protests that additional overtime costs will be incurred as a result of the
order. The sales department argues that the order is from an important customer. The
production department processes the order. To control costs, which department should never be
charged with the overtime costs generated as a result of the rush order?
a. Shared by production department and sales department
b. Production department
c. Sales department
d. Personnel department
21. In responsibility accounting, a center's performance is measured by controllable costs.
Controllable costs are best described as including
a. Direct material and direct labor, only.
b. Those costs about which the manager is knowledgeable and informed.
c. Only those costs that the manager can influence in the current time period.
d. Only discretionary costs.
22. The segment margin of the Wire Division of Lerner Corporation should not include
a. Variable selling expenses of the Wire Division.
b. The Wire Division's fair share of the salary of Lerner Corporation's president.
c. Fixed selling expenses of the Wire Division.
d. Net sales of the Wire Division.
23. A successful responsibility accounting reporting system is dependent upon
a. A reasonable separation of costs into their fixed and variable components since fixed cost
is not controllable and must be eliminated from the responsibility report.
b. Identification of the management level at which all costs are controllable.
c. The correct allocation of controllable variable costs.
d. The proper delegation of responsibility and authority.
24. If a manufacturing company uses responsibility accounting, which one of the following items is
least likely to appear in a performance report for a manager of an assembly line?
a. Supervisory salaries
b. Materials
c. Repairs and maintenance
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d. Equipment depreciation
25. When comparing performance report information for top management with that for lower-level
management,
a. Top management reports show control over fewer costs.
b. Lower-level management reports are likely to contain more quantitative data and less
financial data.
c. Top management reports are more detailed.
d. Lower-level management reports are typically for longer time periods.
26. A carpet manufacturer maintains a retail division consisting of stores stocking its brand and other
brands, and a manufacturing division that makes carpets and pads. An outside market exists for
carpet padding material in which all padding produced can be sold. The proper transfer price for
padding transferred from the manufacturing division to the retail division is
a. The market price at which the retail division could purchase padding.
b. Variable manufacturing division production cost plus allocated fixed factory overhead.
c. Variable manufacturing division production cost plus variable selling and administrative
cost.
d. Variable manufacturing division production cost.
27. A segment of an organization is referred to as an investment center if it has
a. Authority to make decisions affecting the major determinants of profit including
power to choose its markets and sources of supply.
b. Authority to make decisions over the most significant costs of operations including
power to choose the sources of supply.
c. Authority to provide specialized support to other units within the organization.
d. Authority to make decisions affecting the major determinants of profit including
power to choose its markets and sources of supply and significant control over
amount of invested capital.

the
the

the
the

28. In a responsibility accounting system, managers are accountable for

a. Costs over which they have significant influence.
b. Product costs but not for period costs.
c. Incremental costs.
d. Variable costs but not for fixed costs.
29. Which of the following is not true of responsibility accounting?
a. The focus of cost center managers will normally be narrower than that of profit center
managers.
b. Every factor that affects a firm's financial performance ultimately is controllable by
someone, even if that someone is the person at the top of the firm.
c. When a responsibility accounting system exists, operations of the business are organized
into separate areas controlled by individual managers.
d. Managers should only be held accountable for factors over which they have significant
influence.
30. The imputed interest rate used in the residual income approach for performance measurement
and evaluation can best be characterized as the
a. Average return on investment that has been earned by the company over a particular
period.
b. Marginal after-tax cost of new equity capital.
c. Target return on investment set by management.
d. Historical weighted average cost of capital for the company.
31. Which one of the following items would most likely not be incorporated into the calculation of a
division's investment base when using the residual income approach for performance
measurement and evaluation?
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a. Fixed assets employed in division operations.

b. Division inventories when division management exercises control over the inventory
levels.
c. Land being held by the division as a site for a new plant.
d. Division accounts payable when division management exercises control over the amount
of short-term credit used.
32. Residual income is a better measure for performance evaluation of an investment center
manager than return on investment because
a. Desirable investment decisions will not be neglected by high return divisions.
b. The problems associated with measuring the asset base are eliminated.
c. Only the gross book value of assets needs to be calculated.
d. Returns do not increase as assets are depreciated.
33. A firm earning a profit can increase its return on investment by
a. Increasing investment and operating expenses by the same peso amount.
b. Increasing sales revenues and operating expenses by the same percentage.
c. Increasing sales revenue and operating expenses by the same peso amount.
d. Decreasing sales revenues and operating expenses by the same percentage.
34. Most firms use return on investment (ROI) to evaluate the performance of investment center
managers. If top management wishes division managers to use all assets without regard to
financing, the denominator in the ROI calculation will be
a. Total assets available.
b. Total assets employed.
c. Shareholders' equity.
d. Working capital plus other assets.
35. Which of the following is an appropriate base to distribute the cost of building depreciation to
responsibility centers?
a. Number of employees in the responsibility centers
b. Budgeted sales pesos of the responsibility centers
c. Square feet occupied by the responsibility centers
d. Total budgeted direct operating costs of the responsibility centers
36. Gathersburg Retail has three stores in Maryland. Which of the following costs would likely be
included when computing the profit margin controllable by store no. 3's manager?
a. Hourly labor costs incurred by personnel at store no. 3
b. Property taxes attributable to store no. 3
c. The salary of Gathersburg's president
d. The salary of store no. 3's manager
37. Which of the following would be the best measure on which to base a segment manager's
performance evaluation for purposes of granting a bonus?
a. Segment sales revenue
b. Segment contribution margin
c. Profit margin controllable by the segment manager
d. Segment net income
38. When managers of subunits throughout an organization strive to achieve the goals set by top
management, the result is
a. goal congruence.
b. sub-optimization.
c. strategic control.
d. responsibility accounting.

39. If the head of a hotel's food and beverage operation is held accountable for revenues and costs,
the food and beverage operation would be considered a(n):
a. cost center.
b. revenue center.
c. profit center.
d. investment center.
40. Decentralized firms can delegate authority by structuring an organization into responsibility
centers. Which of the following organizational segments is most like a totally independent,
standalone business where managers are expected to "make it on their own"?
a. cost center
b. revenue center
c. profit center
d. investment center
41. A and B are autonomous divisions of a corporation. They have no beginning or ending
inventories, and the number of units produced is equal to the number of units sold. Following is
financial information relating to the two divisions.
Divisions
A
B
Sales
P150,000
P400,000
Other revenue
10,000
15,000
Direct materials
30,000
65,000
Direct labor
20,000
40,000
Variable factory overhead
5,000
15,000
Fixed factory overhead
25,000
55,000
Variable selling and administrative expense
15,000
30,000
Fixed selling and administrative expense
35,000
60,000
Central corporate expenses (allocated)
12,000
20,000
What is the contribution margin of Division B?
a. P235,000
b. P265,000
c. P150,000
d. P205,000
42. The alpha division of a company, which is operating at capacity, produces and sells 1,000 units of
a certain electronic component in a perfectly competitive market. Revenue and cost data are as
follows:
Sales P50,000
Variable costs 34,000
Fixed costs 12,000
The minimum transfer price that should be charged to the beta division of the same company for
each component is
a. P12
b. P46
c. P50
d. P34
43. A firm prepared a segmented income statement that included the following data for its suburban
marketing segment:
Fixed costs controllable by the suburban marketing segment manager
P150,000
Fixed suburban marketing costs controllable by corporate management
250,000
Fixed manufacturing costs allocated to the suburban marketing segment 110,000
Variable manufacturing costs
200,000
Variable selling costs
100,000
Variable administrative costs
130,000
Net sales
950,000
The best measure of the economic performance of the suburban marketing segment is:
a. P260,000
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b. P520,000
c. P120,000
d. P370,000
44. An appropriate transfer price between two divisions of The Stark Company can be determined
from the following data:
Fabricating Division
Market price of subassembly
P50
Variable cost of subassembly
P20
Excess capacity (in units)
1,000
Assembling Division
Number of units needed
900
What is the natural bargaining range for the two divisions?
a. Any amount less than P50
b. Between P20 and P50
c. P50 is the only acceptable price.
d. Between P50 and P70
45. The receipt of raw materials used in the manufacture of products and the shipping of finished
goods to customers is under the control of the warehouse supervisor. The warehouse
supervisor's time is spent approximately 60% on receiving activities and 40% on shipping
activities. Separate staffs are employed for the receiving and shipping operations. The laborrelated costs for the warehousing function are as follows:
Warehouse supervisor's salary
P 40,000
Receiving clerks' wages
75,000
Shipping clerks' wages
55,000
Employee benefit costs (30% of wage and salary costs)
51,000
Total
P221,000
The company employs a responsibility accounting system for performance reporting purposes.
The costs are classified on the report as period or product costs. The total labor-related costs
that would be listed on the responsibility accounting performance report as product costs under
the control of the warehouse supervisor for the warehousing function would be
a. P71,500.
b. P130,000.
c. P169,000.
d. P97,500.
46. A manufacturer produces a product that sells for P10 per unit. Variable costs per unit are P6 and
total fixed costs are P12,000. At this selling price, the company earns a profit equal to 10% of
total peso sales. By reducing its selling price to P9 per unit, the manufacturer can increase its unit
sales volume by 25%. Assume that there are no taxes and that total fixed costs and variable costs
per unit remain unchanged. If the selling price were reduced to P9 per unit, the profit would be
a. P3,000.
b. P6,000.
c. P5,000.
d. P4,000.
47. A retail company determines its selling price by marking up variable costs 60%. In addition, the
company uses frequent selling price markdowns to stimulate sales. If the markdowns average
10%, what is the company's contribution margin ratio?
a. 41.7%
b. 30.6%
c. 37.5%
d. 27.5%
48. Donnelly Corporation manufactures and sells T-shirts imprinted with college names and slogans.
Last year, the shirts sold for P750 each, and the variable cost to manufacture them was P225 per
8

unit. The company needed to sell 20,000 shirts to break even. The net income last year was
P504,000. Donnelly's expectations for the coming year include the following:
The sales price of the T-shirts will be P900
Variable cost to manufacture will increase by one-third
Fixed costs will increase by 10%
The income tax rate of 40% will be unchanged
The selling price that would maintain the same contribution margin rate as last year is
a. P1,000.
b. P900.
c. P825.
d. P750.
49. Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of
8% for any project to be undertaken by her company. The company is decentralized, and leaves
investment decisions up to the discretion of the division managers as long as the 8% return is
expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on
investment of 14% for his division for the past 3 years and expects the division to have the same
return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which
is expected to have a return on investment of 12%. If the Deed Corporation evaluates managerial
performance using return on investment, what will be the preference for taking on the proposed
cosmetics line by Edith Carolina and Michael Sanders?
a. Carolina will accept / Sanders will accept.
b. Carolina will accept / Sanders will reject.
c. Carolina will reject / Sanders will reject.
d. Carolina will reject / Sanders will accept.
50. Listed below is selected financial information for the Western Division of the Hinzel Company for
last year.
Amount
(thousands)
Average working capital
P625
General and administrative expenses
75
Net sales
4,000
Average plant and equipment
1,775
Cost of goods sold
3,525
If Hinzel treats the Western Division as an investment center for performance measurement
purposes, what is the before-tax return on investment (ROI) for last year?
a. 16.67%
b. 22.54%
c. 19.79%
d. 34.78%
51. The following data pertain to Lopez Enterprises:
Variable manufacturing cost
P70
Variable selling and administrative cost
20
Applied fixed manufacturing cost
40
Allocated fixed selling and administrative cost
15
What price will the company charge if the firm uses cost-plus pricing based on absorption
manufacturing cost and a markup percentage of 110%?
a. P121
b. P147
c. P210
d. P231
52. The Razooks Company, which manufactures office equipment, is ready to introduce a new line of
portable copiers. The following copier data are available:
Variable manufacturing cost
P180
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Applied fixed manufacturing cost

Variable selling and administrative cost
Allocated fixed selling and administrative cost
What price will the company charge if the firm uses cost-plus
manufacturing cost and a markup percentage of 220%?
a. P396.00
b. P495.00
c. P576.00
d. P643.50

90
60
75
pricing based on variable

53. If the target profit is P60,000 for a volume of 480 units, fixed costs are P168,000, and the variable
cost per unit is P450, then the markup percentage on variable cost would be:
a. 104.56%.
b. 105.56%.
c. 106.00%.
d. 106.45%.
54. Franklin Electronics currently sells a camera for P240. An aggressive competitor has announced
plans for a similar product that will be sold for P205. Franklin's marketing department believes
that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost
to manufacture and distribute the camera is P175, and Franklin has a profit goal of 20% of sales.
If Franklin meets competitive selling prices, what is the company's target cost?
a. P41
b. P48
c. P164
d. P175
Items 55 to 57 are based on the following information:
St. Paul Auto Repair uses time and material pricing. The body shop, which anticipates 10,000
direct labor hours of activity, has the following data:
Annual overhead costs:
Material handling and storage
P 15,000
Other overhead costs
75,000
Annual cost of materials used
187,500
Labor rate per hour, including fringe benefits
18
Hourly charge to achieve profit margin
11
55. The time charge per hour is:
a. P19.50.
b. P27.00.
c. P29.00.
d. P36.50.
56. The amount to be added to each peso of material cost to obtain the total material charge is:
a. P0.06.
b. P0.08.
c. P0.10.
d. P0.13.
57. If a particular job takes 20 hours of labor and P800 of materials, the price charged for the job is:
a. P1,380.
b. P1,444.
c. P1,530.
d. P1,594.
Items 58 to 60 are based on the following information:
Laissez Faire has two divisions: the Cologne Division and the Bottle Division. The Bottle Division
produces containers that can be used by the Cologne Division. The Bottle Division's variable
manufacturing cost is P2, shipping cost is P0.10, and the external sales price is P3. No shipping
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costs are incurred on sales to the Cologne Division, and the Cologne Division can purchase similar
containers in the external market for P2.60.
58. The Bottle Division has sufficient capacity to meet all external market demands in addition to
meeting the demands of the Cologne Division. Using the general rule, the transfer price from the
Bottle Division to the Cologne Division would be:
a. P2.00.
b. P2.10.
c. P2.60.
d. P2.90.
59. Assume the Bottle Division has no excess capacity and could sell everything it produced
externally. Using the general rule, the transfer price from the Bottle Division to the Cologne
Division would be:
a. P2.10.
b. P2.60.
c. P2.90.
d. P3.00.
60. The maximum amount the Cologne Division would be willing to pay for each bottle transferred
would be:
a. P2.00.
b. P2.10.
c. P2.60.
d. P2.90.
61. Zang Enterprises had a sales margin of 7%, sales of P5,000,000, and invested capital of
P4,000,000. The company's ROI was:
a. 5.60%.
b. 8.75%.
c. 11.43%.
d. 17.86%.
62. Mission, Inc., reported a return on investment of 12%, a capital turnover of 5, and income of
P180,000. On the basis of this information, the company's invested capital was:
a. P300,000.
b. P900,000.
c. P1,500,000.
d. P7,500,000.
63. The information that follows relates to Katz Corporation:
Sales margin: 7.5% Capital turnover: 2 Invested capital: P20,000,000
On the basis of this information, the company's sales revenue is:
a. P1,500,000.
b. P3,000,000.
c. P10,000,000.
d. P40,000,000.
64. Extron Division reported a residual income of P200,000 for the year just ended. The division had
P8,000,000 of invested capital and P1,000,000 of income. On the basis of this information, the
imputed interest rate was:
a. 2.5%.
b. 10.0%.
c. 12.5%.
d. 20.0%.
65. The following information relates to the Atlantic Division of Ocean Enterprises:
Interest rate on debt capital: 8%
Cost of equity capital: 12%
Market value of debt capital: P50 million
Market value of equity capital: P80 million
Income tax rate: 30%
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On the basis of this information, Atlantic's weighted-average cost of capital is:

a. 7.3%.
b. 8.3%.
c. 9.5%.
d. 10.8%.
66. The market value of Glendales debt and equity capital totals P180 million, 80% of which is equity
related. An analysis conducted by the companys finance department revealed a 7% after-tax
cost of debt capital and a 10% cost of equity capital. The tax rate given is 30%. On the basis of
this information, Glendales weighted-average cost of capital:
a. is 7.6%.
b. is 8.5%.
c. is 9.4%.
d. is 9.0%.
67. The following information relates to Houston, Inc.:
Total assets
P9,000,000
After-tax operating income
1,500,000
Current liabilities
800,000
If the company has a 10% weighted-average cost of capital, its economic value added would be:
a. P(200,000).
b. P530,000.
c. P680,000.
d. P970,000.
68. Carolina Corporation has an after-tax operating income of P3,200,000 and a 9% weightedaverage cost of capital. Assets total P7,000,000 and current liabilities total P1,800,000. On the
basis of this information, Carolina's economic value added is:
a. P2,408,000.
b. P2,732,000.
c. P3,668,000.
d. P3,992,000.
69. McKenna's Florida Division is currently purchasing a part from an outside supplier. The
company's Alabama Division, which has excess capacity, makes and sells this part for external
customers at a variable cost of P22 and a selling price of P34. If Alabama begins sales to Florida,
it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on
internal transfers by P4. If sales to outsiders will not be affected, Alabama would establish a
transfer price of:
a. P18.
b. P22.
c. P30.
d. P34.
70. The following data relate to Department no. 3 of Tsay Corporation:
Segment contribution margin
P540,000
Profit margin controllable by the segment manager
310,000
Segment profit margin
150,000
On the basis of this information, Department no. 3's variable operating expenses are:
a. P80,000.
b. P160,000.
c. P230,000.
d. not determinable.
If my mind can conceive it, and my heart can believe it, I know I can achieve it.
Jesse Jackson
Good luck and God bless you! - GJMSanchez

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