MULTIPLE CHOICES:
1. The basic purpose of responsibility accounting is:
a. Motivation
b. Variance analysis
c. Authority
d. Budgeting
2. Which of the following formulas best describes the return on investment calculation?
a. Return on sales x assets turnover
b. Net Income
Sales
c. Sales
Total Assets
d. Sales x Profit Ratio
3. Which of the following correctly describes a cost center?
a. A business segment whose manager has control over costs but not over revenue or investment funds
b. A business segment whose manager has control over both cost and revenue but not investment funds
c. A business segment whose manager has control over cost, revenue, and investments
d. All of the above
4. Which of the following is true about common fixed costs?
a. A common fixed cost is incurred due to the existence of the segment
b. If any segment did not exist, the common fixed cost would not occur
c. Only common fixed costs are charged to individual segments in the segmented income statement
d. Common fixed costs support the operations of more than one segment
5. Economic value added, or residual income is a measurement mainly used to evaluate
a. revenue centers.
b. cost centers.
c. profit centers
d. investment centers.
e. responsibility centers.
APPLICATION
1. The receipts of raw materials used in the manufacture of products and theshipping of finished goods is under the
control of the warehouse supervisor, whose time is spentapproximately 60%
on receiving and40% on shipping activities. Separate staffs for theseoperations are employed. The labor-related
costs for the warehousing function are asfollows:
Warehouse supervisor’s salary P 80,000
Receiving clerk’s wages 150,000
Shipping clerk’s Wages 110,000
Employee benefit costs(20% of
wage and salarycost) 68,000
Total P 408,000
The company employs a responsibility accounting system for performance reporting purposes.
a. What is the total of labor-related costs under the control of the warehouse supervisor?
b. What is the total labor related costs that is noncontrollable by the warehousesupervisor?
2. Mr. Pooh, a management consultant by profession, is bombarded with variousquestions from his clients. As his
closest friend, he sought help from you, thus, these questions:
a. If Division C has a return on sales of 10%, income of P5,000 and an investment turnover of 6 times, its ROI
is:
b. If the operating asset turnover increased by 70% and the operating income margindecreased by 20%, the
ROI would increase by what percentage?
c. Reed Company’s sales last year totaled P150,000 and its return on investment was12%. If the company’s
turnover was 2.5, then its net income must have been:
d. Largo Company recorded for the past year sales of P750,000 and average operatingassets of P375,000.
What ROS does Largo Company need to earn to achievean ROI of 15%?
e. The Dela Merced Company’s Household Products Division reported in 2009 sales of P15,000,000, an asset
turnover ratio of 2.5 times and a rate of return on average assetsof 18%. The percent of net income to
sales is:
3. The following year end data pertain to Adan Corporation:
Earnings before interest and taxes P800,000
Current Assets 800,000
Non-current Assets 3,200,000
Current Liabilities 400,000
Non-current Liabilities 1,000,000
Adan pays an income tax rate of 30%. Its weighted average cost of capital is 10%. What is Adan Economic Value
Added?
4. Electron Inc. produces a variety of electronic products which it sells to retail stores throughout the country. The
following data is available for the year for one of the products
Units started into production 2,000,000
Total goods units completed 1,950,000
Total hours of value-added
production time 300,000
Total production hours 380,000
a. Compute the manufacturing cycle efficiency (MCE).
b. What is the total throughput per hour?
5. The following information for a recent project was taken from the records of Glory Company:
Days
Process Time 15.0
Inspection 0.5
Waiting Time
From order receipt until start of production 6.0
From start of production through project completion 3.0
Move Time 1.5
a. How long did it take to complete the project once production commenced?
b. Compute the manufacturing cycle efficiency.
c. As judged by the cycle efficiency, what percentage of the overall production time was spent on (1) value
adding activities and (2) non-value adding activities?
