1.

The ROI calculation will indicate:

Group of answer choices

how effectively a company used its invested capital.

the percentage of each sales dollar that is invested in assets.

the sales dollars generated from each dollar of income.

the overall quality of a company's earnings.

the invested capital generated from each dollar of income.

2. Which of the following is a disadvantage of a focus on return on investment?

Group of answer choices

It can produce a narrow focus on divisional profitability at the expense of profitability for the
overall firm.

It can encourage managers to focus on the long run at the expense of the short run.

It can encourage managers to cut inventories and reduce overall investment

It can encourage managers to focus on cost cutting efforts

3. When a manager takes an action that benefits his or her responsibility center, but not the
company as a whole,
Group of answer choices

there is a lack of goal congruence

it is a non-controllable action

the manager should be fired

the center must be an artificial profit center

4. Which of the following types of costs is always relevant to a decision?

Group of answer choices
Fixed costs.

Incremental costs.

Sunk costs.

Average costs.

5. ABC Corporation has no excess capacity. If the firm desires to implement the general
transfer-pricing rule, opportunity cost would be equal to:

Group of answer choices

the summation of variable cost plus fixed cost.

the direct expenses incurred in producing the goods

Zero

the total difference in the cost of production between two divisions.

the contribution margin forgone from the lost external sale.

6. A cost center manager:

Group of answer choices

often oversees divisional operations.

may be the manager who oversees the operations of a retail store.

would normally be held accountable for producing an adequate return on invested capital.

does not have the ability to produce revenue.

may be involved with the sale of new marketing programs to clients.

7. A factory that makes a part has significant idle capacity. The factory's opportunity cost
of making this part is equal to:

Group of answer choices

zero.

the semivariable cost per unit.

the fixed manufacturing cost per unit.

the total manufacturing cost per unit.

the variable manufacturing cost per unit.

8. A general calculation method for transfer prices that achieves goal congruence begins
with the additional outlay cost per unit incurred because goods are transformed and then

Group of answer choices

adds the sunk cost per unit to the organization because of the transfer

subtracts the opportunity cost per unit to the organization because of the transfer

subtracts the sunk cost per unit to the organization because of the transfer

adds the sales revenue per unit to the organization because of the transfer

adds the opportunity cost per unit to the organization because of the transfer

9. If the selling division is operating at less than full capacity, the floor of the bargaining
range would most probably set at
Group of answer choices

average price of all products by selling division

full manufacturing cost

manufacturing cost plus some percentage for profit

variable cost of manufacturing

market price

10. Computer City manufactured 100 personal computers at a cost of P65,000. It can sell
them as is for P100,000 or install hard disks in them and sell them for P140,000. The P65,000
original manufacturing cost is:
Group of answer choices

a fixed cost because it will remain the same no matter which action is taken.

a sunk cost because it is not relevant to the decision.

an incremental cost because it is relevant to the decision.

an out-of-pocket cost because it has already been paid.

11. Which of the following is not relevant in deciding whether or not to accept a special
order?
Group of answer choices

Incremental revenue that will be earned.

The average cost of production if the special order is accepted.

The effect that the order will have on the company’s regular sales volume and selling price.

Additional costs that will be incurred.

12. How does a company determine whether to sell a product “as is” or process it further?

Group of answer choices

If the costs to process further exceed the costs of current production, the product should be
processed further.

If the increase in revenue from selling the product after further processing is greater than
the additional costs incurred in further processing, the company should opt for further
processing.

If the revenues generated by processing the product further exceed the revenues from selling the
product “as is,” the company should process further.

If the costs to process further exceed the costs of current production, the product should be sold
‘as is.”

13. Generally, calculation for transfer prices between divisions that would result to goal
congruence begins with the additional outlay cost per unit incurred because goods are
transformed and then
Group of answer choices

subtracts the opportunity cost per unit to the organization because of the transfer.

adds the sunk cost per unit to the organization because of the transfer.

adds the sales revenue per unit to the organization because of the transfer.

subtracts the sunk cost per unit to the organization because of the transfer.

adds the opportunity cost per unit to the organization because of the transfer.

14. In contrast to the total product and variable cost concepts used in setting seller's prices,
the target cost approach assumes that:

Group of answer choices

a markup is added to product cost.

a markup is added to total cost.

a markup is added to variable cost.

selling price is set by the marketplace.

15. All of the following actions will increase ROI except:

Group of answer choices

an increase in sales revenues.

an improvement in manufacturing efficiency.

a decrease in operating expenses.

a decrease in the number of units sold.

a decrease in a company's invested capital.

16. Opportunity costs:

Group of answer choices

are benefits from among alternative courses of action.

are benefits treated as period costs under variable costing.

are benefits that could have been obtained by following another course of action.

are benefits as a result of past actions.

17. Consider the ff. statements:

I. Residual income generates a dollar amount which represents the increase in value to the
company beyond the cost necessary to pay for the financing of assets.
II. A cost center incurs costs and generates revenues and cost center managers are evaluated
on the profitability of their centers.
III. More costs become controllable as one moves down to each lower level of managerial
responsibility.

Group of answer choices

None of these statements are true.

All of these statements are true.

One of these statements is true.

Two of these statements are true.

18. If a cost is irrelevant to a decision, the cost could not be

Group of answer choices

a future cost.

a sunk cost.

an incremental cost.

A variable cost.

19. The manager of a division is displeased with the ROI of the division. One step that would
increase ROI (holding everything else constant) is
Group of answer choices

increasing investment
increasing cost

decrease operating income

increasing sales

20. 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"?

Group of answer choices

Contribution center

Cost center

Investment center

Revenue center

Profit center

21. The best measure of the performance of the manager of a profit center is the
Group of answer choices

rate of return on investment.

amount of controllable margin generated by the profit center.

amount of contribution margin generated by the profit center.

success in meeting budgeted goals for controllable costs

23. In a sell or process further decision, consider the following costs:

I. A variable production cost incurred prior to split-off.
II. A variable production cost incurred after split-off.
III. An avoidable fixed production cost incurred after split-off.

Which of the above costs is (are) not relevant in a decision regarding whether the product
should be processed further?
Group of answer choices

Only I and II
Only III

Only I

Only I and III

24. Which of the following describes the goal that should be pursued when setting transfer
prices?

Group of answer choices

Establish incentives for autonomous division managers to make decisions that are in the
overall organization's best interests

Maximize profits of the buying division.

Minimize opportunity costs.

Allow top management to become actively involved when calculating the proper dollar amounts.

Maximize profits of the selling division.

25. Consider the following statements about residual income:

I. Residual income incorporates a firm's cost of acquiring investment capital.

II. Residual income is a percentage measure, not a dollar measure.
III. If used correctly, residual income may result in division managers making decisions that
are in their own best interest and not in the best interest of the entire firm.

Which of the above statements is (are) true?

Group of answer choices

I and III.

II and III.

I and II.

II only.

I only.
26. In transfer pricing, if the selling division does not meet all bona fide outside prices,
then:

Group of answer choices

the buying division should be free to purchase outside

the buying division should accept the selling division’s offer

the company should drop the market price approach and use cost to control transfers

the transfer should be made at the lowest outside price

27.
Answer: Reject the investment if it returns less than 15% ROI.

28. B Manufacturing has 6,250 labor hours available for producing M and N. Consider the
following information:

Product M

Product N

Maximum demand (units)

6,500

12,000

Contribution margin per unit

P5.00

P5.70

Number of units produced/labor hour

If B follows proper managerial accounting practices in terms of setting a production schedule,

how much contribution margin would the company expect to generate?

83,800

29. Problem
Answer D: 40,500

30. T Company is currently operating at a loss of P15,000. The sales manager has received a
special order for 5,000 units of product, which normally sells for P35 per unit. Costs associated
with the product are: direct material, P6; direct labor, P10; variable overhead, P3; applied fixed
overhead, P4; and variable selling expenses, P2. The special order would allow the use of a
slightly lower grade of direct material, thereby lowering the price per unit by P1.50 and selling
expenses would be decreased by P1. If T wants this special order to increase the total net income
for the firm to P10,000, what sales price must be quoted for each of the 5,000 units?
Group of answer choices

P23.50

P24.50

P34.00

P27.50

31.
Turnover: 2

32.

Separate VC: 45,000

33. M Division of W Inc. expects the following results for the coming period:

Sales (90,000 units at P30) P2,700,000

Variable costs, at P20 (1,800,000)
Fixed costs (700,000)
Income P 200,000
M Division has a capacity of 100,000.

C Division of W Inc. currently purchases 20,000 units of a part for one of its products from an
outside supplier at P32 per unit. C's manager believes he could use a minor variation of M's
product instead, and offers to buy the units from M at P26. Making the variation desired by C
Division would cost M Division an additional P5 per unit and would increase M's annual cash
fixed costs by P80,000.

Assuming M’s manager agrees to C's manager offer, what is the overall effect of these
transactions in the income of W Inc?

Group of answer choices

P 40,000 decrease

P160,000 decrease

P 120,000 increase

P 80,000 decrease

34. The S Division of P Company is considering an investment in a new project. The project
has an estimated cost of P1,000,000. If P Company has a minimum rate of return of 12%, what is
the return on investment on this project in order to generate 15% residual income ratio?
Group of answer choices

15%

3%

27%

12%

35. The First Division of Ranked Corp. has the following information for the year:

Average operating assets P2,400,000

Reqiured rate of return 15%
Residual income P72,000
What was the division's return on investment for the year?

Group of answer choices

21%
15%

18%

24%

36.

Answer: 1.68 Stamp

37.
Answer: 33.33%

39.

Answer: D

40.
Answer: 97

41. Segment A generated sales revenues of P400,000 and variable operating expenses of
P180,000. Its controllable fixed expenses were P40,000. It was assigned 20% of P200,000 of
fixed costs controlled by others. The common fixed costs were P25,000. What was Segment A's
controllable segment profit margin?
Group of answer choices

P140,000

P180,000

P220,000

P160,000

43.
Answer:

44. Baker Company manufactures and sells 20,000 units of Product X per month. Each unit
of Product X sells for P15 and has a contribution margin of P4. If Product X is discontinued,
P56,000 in fixed monthly overhead costs would be eliminated and there would be no effect on
the sales volume of Baker Company’s other products. If Product X is discontinued, Baker
Company’s monthly income before taxes should:
Group of answer choices

decrease by P80,000

increase by P24,000

increase by P80,000

decrease by P24,000

45.
Answer: four and five

46.

Answer:

47.
Answer: 12%

48.

Answer: 41.67%