MANAGEMENT ADVISORY SERVICES
THEORY
Basic concepts
1. Richmond Enterprises is reviewing its policies and procedures in an effort to enhance goal
congruence throughout the organization. The processes that are most likely to encourage this
behavior are
A. Reciprocal cost allocation, zero-base budgeting, and standard costing.
B. Cost-based transfer pricing, imposed budgeting, and activity-based costing.
C. Cost-based transfer pricing, management-by-objective performance evaluation, and
participatory budgeting.
D. Participatory budgeting, reciprocal cost allocation, and management-by-objective
performance evaluation.
2. An effective management by objectives (MBO) program can increase organizational
effectiveness. Which of the following contributes to an effective MBO program?
A. Emphasis on "should do" rather than "must do" objectives.
B. Objectives that are quantified, clearly measurable, and state target dates for completion.
C. Managers who hold their subordinates strictly accountable for achieving their objectives
precisely as they have been written.
D. All of the answers are correct.
3. Which of these assertions refer to responsibility accounting?
1. Costs and revenues are identified with individuals for better control and performance
appraisal.
2. Performance reports under this concept includes variances of actual amounts versus plan.
3. Third parties who are external users are the main recipients of information.
4. Only expenses which are directly under the control of managers should ideally be charged
to them.
A. Assertions 1 and 2 only.
C. Assertions 1, 2 and 4 only.
B. Assertions 1 and 4 only.
D. All four assertions.
4. All of the following are elements of responsibility accounting except
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A.
B.
C.
D.
Control reports.
Chart of accounts classification.
Responsibility center definition.
Planning systems and systemic approaches.
5. Cost centers are
A. Amounts of expenditure attributable to various activities.
B. Units of product or service for which costs are ascertained.
C. Functions or locations for which costs are ascertained for control purposes.
D. A section of an organization for which budgets are prepared and control exercised.
6. Which of the following types of responsibility centers has accountability for revenues?
A. Cost centers and investment centers.
C. Expense and investment centers.
B. Cost centers and profit centers.
D. Profit centers and investment centers.
7. A formal report in responsibility accounting is covered by the guideline of
A. GAAP
C. PICPA
B. Management
D. SEC
Responsibility reporting system
8. A responsibility reporting system
A. Does not permit comparative evaluation of responsibility centers.
B. Does not permit management by exception at each level of responsibility.
C. Begins with the highest level of responsibility and moves downward to the lowest level.
D. Involves the preparation of a report for each level of responsibility shown in the company’s
organization chart.
9. Which of these are among the qualities of a good report under the concept of responsibility
accounting?
1. It should be consistent in form and content for each issue.
2. It should be prompt, timely and regularly issued.
3. It should easily be understood by users as to the contents, their significance and how to
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use them.
It should be able to pinpoint who is to blame as a pre-requisite to explain variances.
It should highlight efficiencies and inefficiencies.
It should be comparative and analytical.
It should be comprehensive as to include all details that can possibly be contained in the
report.
A. All except 4 and 7.
C. Statements 1, 2, 3, 4 and 7 only.
B. All except 4, 5 and 6.
D. All seven statements.
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except:
A. Insurance costs of plant and equipment.
B. Power rates imposed by government agency.
C. Basic salary of permanent manufacturing personnel.
D. Monthly maintenance cost of equipment covered by an annual contract.
4.
5.
6.
7.
10. In responsibility accounting, there are two (2) types of reports distinguished as to goals and
objectives
A. Horizontal reporting and vertical reporting.
B. Trends analysis reporting and comparative reporting.
C. Operations reporting and financial condition reporting.
D. Responsibility performance reporting and information reporting.
11. Which of the following items of cost would be least likely to appear in a performance report
based on responsibility accounting technique for the supervisor of an assembly line in a large
manufacturing situation?
A. Direct labor.
C. Repairs and maintenance.
B. Materials.
D. Supervisor’s salary.
12. Among the management accounting concepts is controllability which means (3)
A. Accounting information must be of such quality that confidence can be placed in it.
B. Management accounting must ensure that flexibility is maintained in assembling and
interpreting information.
C. It is necessary at all times to identify the responsibilities and key result areas of the
individuals within the organization.
D. Management accounting identified elements or activities which management can or
cannot influence, and seeks to arrest risks and sensitivity factors.
13. The following costs may be controllable at certain levels within a manufacturing concern,
14. Managers are most likely to accept allocations of common costs based on
A. Ability to bear.
C. Cause and effect.
B. Benefits received.
D. Fairness.
Performance evaluation
15. This practice is irrelevant in evaluating performance of an activity
A. Planning for future activities
B. Fixed budgets for mixed costs
C. Flexible budget for mixed costs
D. Difference between planned cost and actual
16. The following information pertains to Bala Co. for the year ended December 31, 1991:
Sales
$600,000
Income
100,000
Capital investment
400,000
Which of the following equations should be used to compute Bala’s return on investment?
A. (4/6) x (1/6) = ROI
C. (6/4) x (1/6) = ROI
B. (4/6) x (6/1) = ROI
D. (6/4) x (6/1) = ROI
17. Maplewood Industries wants its division managers to concentrate on improving profitability.
The performance evaluation measures that are most likely to encourage this behavior are
A. Dividends per share, return on equity, and times interest earned.
B. Turnover of operating assets, gross profit margin, and return on equity.
C. Return on operating assets, the current ratio, and the debts-to-equity ratio.
D. Turnover of operating assets, dividends per share, and times interest earned.
18. Compared to a jewelry store, a supermarket has
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A. Higher margin and higher turnover.
B. Higher margin and lower turnover.
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C. Lower margin and higher turnover.
D. Lower margin and lower turnover.
19. Presently, the Alligator Division of Animal Crackers Co. has a profit margin of 30 percent. If
total sales rise by $100,000, both the numerator and the denominator of the profit margin will
increase. The net result will be
A. no change in the profit margin ratio.
B. a decrease in the profit margin ratio to below 30 percent.
C. an increase in the profit margin ratio to above 30 percent.
D. a change in the profit margin ratio that cannot be determined from this information.
20. A subunit of an organization is evaluated on the basis of its ROI. If this subunit's sales and
expenses both increase by $30,000, how will the following measures be affected?
A.
B.
C.
ROI
Increase
Indeterminate
No change
Asset turnover
Increase
Increase
Increase
Profit margin
Increase
Decrease
Decrease
21. Which combination of changes in asset turnover and income as a percentage of sales will
maximize the return on investment?
A.
B.
C.
D.
Asset turnover
Increase
Increase
Decrease
Decrease
Income as a percentage of sales
Increase
Decrease
Increase
Decrease
22. Which of the following changes would NOT change return on investment (ROI)?
A. increase total assets
B. increase sales and expenses by the same percentage
C. decrease sales and expenses by the same percentage
D. increase sales dollars by the same amount as total assets
E. decrease sales and expenses by the same dollar amount
investment of 20 percent. Division A has a return on investment of 25 percent. If ABC Corp.
evaluates its managers on the basis of return on investment, how would the Division A
manager and the ABC Corp. president react to a new investment that has an estimated return
on investment of 23 percent?
A.
B.
C.
D.
Division A manager
Accept
Accept
Reject
Reject
ABC Corp. president
Accept
Reject
Accept
Reject
24. Residual income is a better measure for performance evaluation of an investment center
manager than return on investment because
A. Returns do not increase as assets are depreciated.
B. Only the gross book value of assets needs to be calculated.
C. The problems associated with measuring the asset base are eliminated.
D. Desirable investment decisions will not be neglected by high return divisions.
25. Delmar Corporation is considering the use of residual income as a measure of the
performance of its divisions. What major disadvantage of this method should the company
consider before deciding to institute it?
A. opportunities may be undertaken which will decrease the overall return on investment.
B. this method does not make allowance for difference in the size of compared divisions.
C. residual income does not measure how effectively the division manager controls costs.
D. the minimum required rate of return may eliminate desirable opportunities from
consideration.
26. Power Corporation has two divisions, X and Y, Division X is evaluating a project that will earn a
return which is more than the imputed interest charged for the invested capital, but less than
the division’s historical return on invested capital. Division Y is considering a project that will
earn a rate of return which is greater than the division’s historical return on invested capital,
but less than the imputed interest charge for invested capital. If the corporate objective is to
maximize residual income, the division should decide as follows:
A. Y accept and X accept.
C. Y reject and X accept.
B. Y accept and X reject.
D. Y reject and X reject.
27. A prospective project under consideration by P Division of C Co. has an estimated residual
23. ABC Corp. is composed of three operating divisions. Overall, the ABC Corp. has a return on
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income of a negative $20,000. If the project requires an investment of $400,000, the
A. company's target rate is 15 percent.
B. project's return on investment is zero.
C. project generates a negative return on investment.
D. project's return on investment is 5 percent less than the company's target rate.
28. Suppose a manager is to be measured by residual income. Which of the following will not result
in an increase in the residual income figure for this manager, assuming other factors remain
constant?
A. An increase in sales.
B. A decrease in expenses.
C. A decrease in operating assets.
D. An increase in the minimum required rate of return.
Transfer pricing
29. In a decentralized company in which divisions may buy goods from one another, the transferpricing system should be designed primarily to
A. Increase in the consolidated value of inventory.
B. Allow division managers to buy from outsiders.
C. Minimize the degree of autonomy of division managers.
D. Aid in the appraisal and motivation of managerial performance.
30. The minimum potential transfer price is determined by
A. the lowest outside price for the good.
B. incremental costs in the selling division.
C. the extent of idle capacity in the buying division.
D. negotiations between the buying and selling division.
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31. The maximum of the transfer price negotiation range is
A. set by the selling division.
B. determined by the buying division.
C. influenced only by internal cost factors.
D. negotiated by the buying and selling division.
32. The optimal transfer price from the viewpoint of the corporation is
A. variable cost
B. absorption cost plus markup
C. variable cost plus opportunity cost
D. absorption cost plus opportunity cost
E. absorption cost plus selling expenses
33. To avoid waste and maximize efficiency when transferring products among divisions in a
competitive economy, a large diversified corporation should base transfer prices on
A. full cost.
C. production cost.
B. market price.
D. variable cost.
Gross profit analysis
34. In gross profit analysis, if the cost price variance is zero, such variance indicates that (3)
A. Manufacturing management was able to control production costs at budgeted costs.
B. Manufacturing management was unable to keep production costs at budgeted costs.
C. Manufacturing management was able to control production cost below budgeted costs.
D. Manufacturing management was not able to control production at budgeted costs but
purchasing was able to keep at budgeted price.
35. If a company has favorable sales volume variance, its
A. Income will be positive.
B. Sales price variance is also favorable.
C. Total contribution margin will be more than planned.
D. Total contribution margin might be less than planned.
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PROBLEMS
Segmented Income Statement
1. Mr. Jun Iglesias is the manager of Profit Center #5. His unit reported the following the period
just ended:
Contribution margin:
P350,000
Period expenses:
Manager’s salary
P100,000
Depreciation expense
40,000
Allocated administrative costs
25,000
165,000
Profit center # 5 income
P185,000
Of the foregoing, in all likelihood, Mr. Iglesias controls
A. P100,000
C. P185,000
B. P165,000
D. P350,000
2. 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, whose time is spent
approximately 60% on receiving and 40% on shipping activities. Separate staffs for these
operations are employed. The labor-related costs for the warehousing function are as follows:
Warehouse supervisor’s salary
$ 40,000
Receiving clerk’s wages
75,000
Shipping clerk’s wages
55,000
Employee benefit costs (30% of wage and salary costs)
51,000
$221,000
The company employs a responsibility accounting system for performance reporting purposes.
Costs are classified as period or product costs. What is the total of labor-related costs
reported as product costs under the control of the warehouse supervisor?
A. $97,500
C. $130,000
B. $128,700
D. $169,000
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segment margin of $25,000, and sales of $200,000. Given this data, the sales for Division E
for last year were:
A. $50,000.
C. $116,667.
B. $87,500.
D. $150,000.
4. Leis Retail Company has two Stores, M and N. Store N had sales of $180,000 during March,
a segment margin of 30%, and traceable fixed expenses of $26,000. The company as a whole
had a contribution margin ratio of 25% and $120,000 in total contribution margin. Based on
this information, total variable expenses in Store M for the month must have been:
A. $140,000.
C. $300,000.
B. $260,000.
D. $360,000.
5. Reardon Retail Company consists of two stores, A and B. Store A had sales of $80,000 during
March, a contribution margin ratio of 30%, and a segment margin of $11,000. The company as
a whole had sales of $200,000, a contribution margin ratio of 36%, and segment margins for
the two stores totaling $31,000. If net income for the company was $15,000 for the month, the
traceable fixed expenses in Store B must have been:
A. $16,000.
C. $28,000.
B. $20,000.
D. $31,000.
6. More Company has two divisions, L and M. During July, the contribution margin in Division L
was $60,000. The contribution margin ratio in Division M was 40% and its sales were
$250,000. Division M's segment margin was $60,000. The common fixed expenses were
$50,000 and the company net income was $20,000. The segment margin for Division L was:
A. $0.
C. $50,000.
B. $10,000.
D. $60,000.
7. Johnson Company operates two plants, Plant A and Plant B. Johnson Company reported for
the year just ended a contribution margin of $50,000 for Plant A. Plant B had sales of
$200,000 and a contribution margin ratio of 30%. Net income for the company was $20,000
and traceable fixed costs for the two plants totaled $50,000. Johnson Company's common
fixed costs for last year were:
3. Hatch Company has two divisions, O and E. During the year just ended, Division O had a
segment margin of $9,000 and variable costs equal to 70% of sales. Traceable fixed costs for
Division E were $19,000. Hatch Company as a whole had a contribution margin of 40%, a
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A. $40,000.
B. $50,000.
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C. $70,000.
D. $90,000.
What should be the unit selling price to have a 20% return on investment?
A. P28.00
C. P30.80
B. P29.17
D. None of these
8. Denner Company has two divisions, A and B, that reported the following results for October:
Division A
Division B
Sales
$90,000
$150,000
Variable expenses as a percentage of sales
70%
60%
Segment margin
$ 2,000
$ 23,000
If common fixed expenses were $31,000, total fixed expenses must have been:
A. $31,000.
C. $62,000.
B. $52,000.
D. $93,000.
9. 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
Fixed suburban marketing costs controllable by corporate management
Fixed manufacturing costs allocated to the suburban marketing segment
Variable manufacturing costs
Variable selling costs
Variable administrative costs
Net sales
The best measure of the economic performance of the suburban marketing segment is:
A. $10,000
C. $370,000
B. $120,000
D. $520,000
Performance evaluation
10. JLC Inc. has these selected data:
Units to be sold
Total cost of the units
Fixed capital investment
Variable capital on sales
25,000
P 500,000
1,000,000
20%
11. The Valve Division of Fidelity Company produces a small valve that is used by various
companies as a component part in their products. Fidelity 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% on its operating assets.
The Valve Division has average operating assets of P700,000. The valves are sold for P5.
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. 255,885
C. 280,000
B. 265,000
D. 350,000
12. If Division C has a 10% return on sales, income of $5,000, and an investment turnover of 4
times, its ROI is
A. 10%
C. 100%
B. 40%
D. 500%
13. Largo Company recorded for the past year sales of $750,000 and average operating assets of
$375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI
of 15%?
A. 2.00%
C. 9.99%
B. 7.50%
D. 15.00%
14. Sales and average operating assets for Company P and Company Q are given below:
Sales
Average Operating Assets
Company P
$20,000
$ 8,000
Company Q
$50,000
$10,000
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What is the margin that each company will have to earn in order to generate a return on
investment of 20%?
A. 2.5% and 5%.
C. 12% and 16%.
B. 8% and 4%.
D. 50% and 100%.
15. Reed Company's sales last year totaled $150,000 and its return on investment (ROI) was
12%. If the company's turnover was 3, then its net income for the year must have been:
A. $2,000.
C. $12,000
B. $6,000.
D. $18,000.
16. A company had the following results last year: sales, $700,000; return on investment, 28%;
and margin, 8%. The average operating assets last year were:
A. $200,000.
C. $2,450,000.
B. $540,000.
D. $2,500,000.
17. If the operating asset turnover increased by 50 percent and the operating income margin
increased by 50 percent, the ROI would increase by
A. 25%
C. 125%
B. 50%
D. 225%
18. If the operating asset turnover increased by 30 percent and the operating income margin
decreased by 30 percent, the ROI would
A. stay the same
D. increase by 69 percent
B. decrease by 9 percent
E. increase by 91 percent
C. increase by 30 percent.
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Questions 20 thru 23 are based on the following information.
The Millard Division's operating data for the past two years are provided below:
Year 1
Return on investment
12%
Stockholders' equity
$ 800,000
Net operating income
?
Turnover
?
Margin
?
Sales
3,200,000
Millard Division's margin in Year 2 was 150% of the margin in Year 1.
20. The net operating income for Year 1 was:
A. $240,000.
B. $256,000.
C. $384,000.
D. $768,000.
21. The turnover for Year 1 was:
A. 1.2.
B. 1.5.
C. 3.0.
D. 4.0.
22. The sales for Year 2 were:
A. $1.200,000.
B. $3,000,000.
C. $3,200,000.
D. $3,333,333.
23. The average operating assets for Year 2 were:
A. $1,000,000.
C. $1,200,000.
B. $1,080,000.
D. $1,388,889.
Year 2
36%
$ 500,000
360,000
3
?
?
19. Howe Company increased its ROI from 20% to 25%. Net operating income and sales
24. Kim Co.’s profit center Zee had 1991 operating income of $200,000 before a $50,000 imputed
remained at their previous levels of $40,000 and $1,000,000 respectively. The increase in ROI
interest charge for using Kim’s assets. Kim’s aggregate net income from all of its profit centers
was attributed to a reduction in operating assets brought about by the sale of obsolete
was $2,000,000. During 1991, Kim declared and paid dividends of $30,000 and $70,000 on its
inventory at cost (the proceeds from the sale were used to reduce bank loans). By how much
preferred and common stock, respectively. Zee’s 1991 residual income was
was inventory reduced?
A. $140,000
C. $147,000
A. $8,000.
C. $20,000
B. $143,000
D. $150,000
B. $10,000.
D. $40,000.
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25. The Bullwhip Division of Leather Products Co. is considering an investment in a new project.
The project has an estimated cost of $1,000,000. If Leather Products Co. has a target rate of
return of 12 percent, how large does the return on investment on this project need to be to
generate $150,000 of residual income?
A. 12%
C. 25%
B. 15%
D. 27%
26. A Corp. has a target return of 15 percent. If a prospective investment has an estimated return
on investment of 20 percent, and a residual income of $10,000, what is the estimated cost of
the investment?
A. $50,000
C. $100,000
B. $66,667
D. $200,000
27. James Webb is the general manager of the Industrial Park Division, and his performance is
measured using the residual income method. Webb is reviewing the following forecasted
information for the division for next year.
Category
Amount (thousands)
Working capital
$ 1,800
Revenue
30,000
Plant and equipment
17,200
If the imputed interest charge is 15% and Webb wants to achieve a residual income target of
$2,000,000, what will costs have to be in order to achieve the target?
A. $9,000,000
C. $25,150,000
B. $10,800,000
D. $25,690,000
Questions 28 and 29 are based on the following information.
T Division of the Alphabet Co. has the following statistics for its 2002 operations:
Assets available for use
$2,000,000
T Division's return on investment
25%
T Division's residual income
200,000
Return on investment (entire Alphabet Co.)
20%
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28. What is the target rate of return for Alphabet Co.?
A. 10%
C. 20%
B. 15%
D. 25%
29. If Alphabet Co. evaluates its managers on the basis of return on investment, the manager of T
Division would invest in a project costing $100,000 only if it increased net segment income by
at least
A. $10,000.
C. $20,000.
B. $15,000.
D. $25,000.
Questions 30 and 31 are based on the following information.
Dzyubenko Co. reported these data at year-end:
Pre-tax operating income
Current assets
Long-term assets
Current liabilities
Long-term liabilities
The long-term debt has an interest rate of 8%, and its fair value equaled its book value at year-end.
The fair value of the equity capital is $2 million greater than its book value. Dzyubenko’s income tax
rate is 25%, and its cost of equity capital is 10%.
30. What is the weighted-average cost of capital (WACC) to be used in the economic value added
(EVA) calculation?
A. 8.0%
C. 9%
B. 8.89%
D. 10%
31. The EVA is
A. $1,380,000
B. $1,620,000
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C. $1,830,000
D. $3,000,000
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$4,0
4,0
16,0
2,0
5,0
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Questions 32 & 33 are based on the following information.
The following data are available for the South Division of Redride Products, Inc. and the single
product it makes:
Unit selling price
Variable cost per unit
Annual fixed costs
Average operating assets
32. How many units must South sell each year to have an ROI of 16%?
A. 52,000.
C. 240,000.
B. 65,000.
D. 1,300,000.
33. If South wants a residual income of $50,000 and the minimum required rate of return is 10%,
the annual turnover will have to be:
A. 0.32.
C. 1.25.
B. 0.80.
D. 1.50.
Transfer pricing
34. 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 of Part 1 are as follows:
Selling price per unit
P100
Variable cost per unit
60
Fixed cost per unit (Based on 40,000 units capacity per annum)
24
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’s requirement.
If the Second Division would buy 15,000 units of Part 1 from the First Division, the effect on the
corporate profits would be
A. Reduce by P60,000.
C. Increase by P240,000.
B. Increase by P210,000.
D. Increase by P1,500,000.
35. Division A of Harkin Company has the capacity for making 3,000 motors per month and
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regularly sells 1,950 motors each month to outside customers at a contribution margin of $62
per motor. Division B of Harkin Company would like to obtain 1,400 motors each month from
Division A. What should be the lowest acceptable transfer price from the perspective of
Division A?
A. $15.50
C. $35.70
B. $26.57
D. $62.00
36. Division P of Turbo Corporation has the capacity for making 75,000 wheel sets per year and
regularly sells 60,000 each year on the outside market. The regular sales price is $100 per
wheel set, and the variable production cost per unit is $65. Division Q of Turbo Corporation
currently buys 30,000 wheel sets (of the kind made by Division P) yearly from an outside
supplier at a price of $90 per wheel set. If Division Q were to buy the 30,000 wheel sets it
needs annually from Division P at $87 per wheel set, the change in annual net operating
income for the company as a whole, compared to what it is currently, would be:
A. $135,000.
C. $600,000.
B. $225,000.
D. $750,000.
Gross profit variance analysis
37. Casablanca Inc. has a practical production capacity of two million units. The current year’s
budget was based on the production and sales of 1.4 million units during the current year.
Actual statistics came out to be production of 1.44 million units and sales of 1.2 million units.
Selling price is at P20 each and the contribution margin ratio is 30%. The peso value that best
quantifies the marketing division’s failure to achieve budgeted performance for the year is
A. P4,000,000 unfavorable.
C. P1,200,000 unfavorable.
B. P4,800,000 unfavorable.
D. P1,440,000 unfavorable.
38. The income data of Penny Corporation for the years 1984 and 1985 are as follows:
(in P000s)
1985
1984
Increase
Net Sales
6,900
5,100
1,800
Cost of Goods Sold
3,795
3,060
735
Gross Profit
3.105
2,040
1,065
MSQ-04 – RESPONSIBILITY ACCOUNTING, TRANSFER PRICING & GROSS PROFIT VARIATION ANALYSIS
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MANAGEMENT ADVISORY SERVICES
HILARIO TAN
If the sales prices in 1985 are approximately 20% higher than those of 1984, the P1,800,000
increase in net sales is accounted for as follows:
Increase(Decrease
A.
B.
C.
D.
)
Sales Price
P 650,000
P 800,000
P1,000,000
P1,150,000
Sales Volume
P1,150,000
P1,000,000
P 800,000
P 650,000
39. The budgeted sales of product YUM in August were 2,400 units. Beechcrafters, the company
that manufactures YUM, uses a standard costing system, and the standard cost per unit of
product YUM is P21.00. The company recorded the following variances for the month:
Sales price variance
P300 adverse
Sales volume profit variance
P1,200 favorable
During August, 2700 units of product YUM were actually sold. What was the budgeted profit
for product YUM in August?
A. P6,300
C. P9,600
B. P7,200
D. P10,800
Questions 40 through 43 are based on the following information.
Brown Co. is a manufacturer of three consumer products, X, Y, and Z. Sales and other information
related to the said products are as follows:
1979
Units Unit Price
Total Sales Cost of Sales
Product X
15,000
P10
P 150,000
P120,000
Y
20,000
8
160,000
140,000
Z
5,000
6
30,000
22,500
1980
Product X
20,000
P12
P 240,000
P180,000
Y
20,000
9
180,000
150,000
Z
4,000
5
20,000
16,000
Based on the above information, an analysis of the gross profit would show the following changes:
40. The sales price factor shows a variance of
A. P56,000 fav
C. P100,000 fav
B. P56,000 unfav
41. The cost price factor shows a variance of
A. P28,000 fav
B. P28,000 unfav
D. P100,ooo unfav
C. P63,500 fav
D. P63,500 unfav
42. The quantity factor shows a variance of
A. P4,000 fav
B. P4,000 unfav
C. P5,750 fav
D. P5,750 unfav
43. The sales mix factor shows a variance of
A. P2,500 fav
B. P2,500 unfav
C. P2,750 fav
D. P2,750 unfav
ANSWER KEY
THEORY
1. C
2. B
3. C
4. D
5. C
6. D
7. B
8. D
9. A
10. D
11. D
12. D
13. B
14. C
15. B
16. C
17. B
MSQ-04 – RESPONSIBILITY ACCOUNTING, TRANSFER PRICING & GROSS PROFIT VARIATION ANALYSIS
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
A
C
A
E
C
D
B
C
D
D
D
B
B
C
B
A
D
PROBLEM
1. D
2. A
3. A
4. B
5. C
6. B
7. A
8. D
9. B
10. B
11. C
12. B
13. B
14. B
15. B
16. A
17. C
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
D
B
B
B
A
D
D
D
C
B
D
C
A
B
B
A
A
37.
38.
39.
40.
41.
42.
43.
C
D
C
A
B
C
C
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MANAGEMENT ADVISORY SERVICES
18. C
HILARIO TAN
18. B
36. B
MSQ-04 – RESPONSIBILITY ACCOUNTING, TRANSFER PRICING & GROSS PROFIT VARIATION ANALYSIS
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