RESPONSIBILITY ACCOUNTING ‘Accounting 143, Q x Name: MACARMD, AASHIOA LINA CPA Section: C= __ Score: ‘SHORT PROBLEMS. Compute for the amounts asked by each problem. Final answers should be written on the space provided. Write your solutions in a separate sheet of paper. Erasures are strictly not allowed. : PROBLEM 1: The receipts of raw materials used in the manufacture of products and the shipping of finshed goods is under the control of the warehouse supervisor, whose time is spent approximately 60% on receiving and 49% on shipping activities. Separate staffs for these operations ara émployed The labor elated coat too warehousing function are as follows: 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 salary cost) Total 2 What is the To supervisor? Answer _ PROBLEM 2: HoW=Company increased ys ROI from 30% Net operating income and sales remained at their previous level: , respectively. The increase in ROI was attnbuted to a reduction in of sets brought about by the sale of obsolete inventory at cost, the proceeds of which were used to reduce bank loans. 3 3. By how much wasiaventai educed? eee £2, PROBLEM 3: JLC, inc, a manufacturer of wooden tables has these selected data for the year rasa : Units to be sold y Total cost of the units ss ey Fixed capital investment aor” 11,200,000 fer de f Vanable capital on sales a 25% x 4) What should be the ynit selling price to have a/20% cotum-on invesiment? b Answer te aS 5 PROBLEM 4: The following is a summarized income statement of Carr Company's RTW Owvision classified as a profit centes for March. Contribution margin P 500,000 Period expenses Manager's salary percontiact —P 50,000 Facility insurance negotiated by RTW Division manager 100,000 * Corporate expense allocated by higher management Profit center income 400,000 The company is subject to a tax rate of 30% and has a wei ‘cost of capital of 12%... Paoele Prepared by: MBAnswer _ OD, _ 7 T 6. Sire Performance of the duision itself is to be evaluated, what amount must-be ‘Compared with the budget” Answer 3x0. 6ve PROBLEM 5: The following information pertains to the product produced by the Mirror Mirror Division of the Snow White Corporation: Selling price per unit P 200 Manufacturing costs per unit Direct matenals 80 Direct labor 20 Variable factory overhead 15 Fixed factory overhead (P'100,000 in total) 10 Selling and administrative costs per unit: Variable selling costs 10 Variable administrative costs 8 Fixed selling costs (P120,000 in total) 12 Fixed administrative costs (P50,000 in total) 5 ‘During the period, the division produced 15,000 units and was unable to sell of them, Both were the same with the budget. There were no beginning and ending work in process inventories and there was no beginning finished goods inventory during the period. There was no difference between the total budgeted and actual fixed costs. Variable manufacturing costs vary with production while variable selling costs vary with sales. Corporate expenses are allocated to the different divisions of the company. For this period, corporate expenses allocated to Mirror Mirror Division amounted to P175,000. In addition, 30% of the fixed factory overhead, is controllable-by the manager of the division : ‘As for administrative costs, such is PROBLEN 6: Listed below is selected financial information for Western Division of the Cybemet ‘Company for last year Average working capital P 625,000 Generai and administrative expenses 175,000, Net sales 4,100,000 End equipment 4,775,000 3,325,000 Ipedine tax rate 20% ‘This year, gvefage working capital increased by 10% while net incame decreased by 25%. sybemet treats the Western Division as an investment center for performance ‘measurement pore what is the geium on investment for last year? Answer, 7. lowPROBLEM 7: Mr. @ management consultant by profession, is bombarded with various questions from pieGients. As his closest friend, he sought help from you, thus, these questions: 12. If Diwsion C has a retugn on sales of 10%, income of P'5,000 and an investment turnover Sperating asset lumover increased by 70% and the operating income margin fecreased by 20%, the RO! would increase by what percentage? Company's sales last year ‘otaled P150,000 and its retum on investment was 2%. Ifthe company’s tumover was 2.5, then its get income must nave been: fporation has a target return of 15%. If a prospective investment has an estimated return on investment of 20% and a residual income of P10,000, what is the estimated cost of investment? Answer ‘Company recorded for the past year sales of P750,000 and average operating ‘assets of P375,000. What ROS does Largo Company need to eam in order to achieve an ROI of 15%? Answer: 17. Ja€ Dela Merced Company's Household Products Division reported in 2009 sales of 15,000,000, an asset turnover ratio of 2.5 times and a rate of retum on average assets of 18%. The percent of net. to sales is: Smpany had the following results last year: Sales, P700,000; ROI, 28% and Fofit margin, 10%. The average operating assets last year were Answer: ZO 08 PROBLEM 8: 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-éxpected to generate a rate of return of at least 159%. The Valve Division has avers erating assets ot 700,000. Thé vaives are sold for P5.00. Variable costs are P2.5, faive and fixed costs total P465,000 per year. The division has a capacity of Val the Valve Division sell each year to generate the desired rate of retum on its assets? Answer: 224, ovo PROBLEM 9: The following year-end data pertain to Adan Corporation, an entity engaged in the manufacturing of bicycles: Net income P 136,000 Total assets 2,000,000 4, Total stockholders’ equity 500,000 7° stert-Hom Total long-term liabilities 750,000 In comparison with their market values, an equipment of Adan was overvalued by 10,000 and its inventory was undervaliied by P45,000. Adan Corporation pays 1%, Its weighted average cost of capital and desired rate of return on every project and 10% respectively 20. What is Adan’s economic value added (EVA)? Answer: CGl4%) _(J%209)a « PROBLEM 10: Johnson Company operates two plants, Plant A and Plant B. etree Comisiny Feported for the year jusLerided a contribution margin of P75,000. A B had sales 40% Net income of P200,000 and a-emitribution margin ratio the company was.P'15,000 and trace; for the two plants totaled P65,000 ees inson Company's common fixed costs for last year were: Mull © 7 ie Answer, FE, 6g 0 PROBLEM 11: Kim Company's profit center Zee had 2011 operating. income. of,P200,900 before @ P60,000 i interest charge for using Kim's assets. Kim's eggreaste et income. from all of its profit centers was P2,000,000. During 1991, Kim declared anid paid dividéhds of >» P30,009.arfd 70,000 on its preferred and common stock respectively. > °\° 5 Zee's 2011 residual income was: r " sack WO Answer 140, coo PROBLEM 12: T Division of Alphabet Company has the following ‘Statistics for its-operation during the year ended December 31, 2011 Assets available for use P 2,000,000 T Division's ROI T Division's sesidual income 300,000 ‘ompany's RO! 20% s Alphabet ect toa tax ale of $5%6 and has a weighted average cot of capital Alphabet Company evaluates itsqfianager’ on the ba at, the Manager of T Division would invest in a project co: ased net ‘segment income by at ieast = Ne aD f Answer 32,000 oct MU uw peed Yay PROBLEM 13: The Bul Division of Leather Products m pS Tans ak investment in a new proféct. The project has'art estimated costiof P: . Leather Company has a-tsfget rate of retum of 13% end weightéd ai cost of capital of 12%. The tax rate re during the year is 30%. . Sree S| tat low large does the catum_on jngétment “on this project-need to he to genarais~ 200,000 of resiciual income? . = Answer, 23h ey PROBLEM 14: The following data are available for the South Division of Redride Products, inc. and the single product it makes: ‘| P20 wa ©) 280,000 ¢ <—_ assets (2,500,000 The: fate of 30% and its WACE Is 12%...) > f @ uth sell each year to havean ROL of 16927 . ise wants a residual income sceepme-ana the minimum required rate of return is annual will have tbe Answer le , 6 . nN ®) PROBLEM 15: Denner Company has two divisions, A and B.ihat Feported the f results rf for October: a ws _Division A. Division B / Sales - P 190,000" B 250,000,,° Variable expenses as . . percentage of sales 50% a a riow MEAP ADB, NASHIEA L(NCK ‘ ; 4 He GRA) 000 34.000 <5 Tes margin s two divisions, ©" bnd E. Dirring the»year just jended, at 6f_P11,000-and“variable costs ehual t_ 60% _of for Division E were P24.000. Hatch Company as a ae ba ot hf 30%, 2-segiient margin of P35,000.and sales oF £300,000. Gens” ayidy ns jvefi this data, for (O for last year were a ‘Answer, JCF, ORE oh ott ) we PROBLEM 17: Tne Millard Division's operatirid \udlta tor tHe past two years are provided Below: _ 2 Division has a s Traceable fixed contribuition AF Mouth 20' 2012, E 1 Return on investment + 20% 45% ‘Stockholders’ equity P 900,000 P 550,000 > [> Net operating in Day D- 480.000 re Sool Turnon ss . 3, # Margin _ Wh. = uk ‘i ~ Sales ‘. 3,200,000 ge 3, Far Millard Division's aefain in 2012 was 450% of themargin in 2011. : 2011 mil for 2012 was: A Lc SoD star cia- x. ee + : es PROBLEM 18: James Tan is the Gendgal maiadst'6f'the Industrial Product Division and his perfor sy residual income method. Tan is reviewing the following " * PeeeNeaRceann Aca aiNhexeeact «10 - “Category = Amount iy) A ‘capital P 2,800,000 ” ,€ nue 30,000,000-%.58). ayamswent pliant ( lant and equipment (> Sse 200,000" The,imputed for the Industrial. Product Division BH ond Tan wants to achieve a residual target of P2,000,009. Gai) gy » costs will hayedp be in etderte actievesthe target? fy, nigral dra) ©) 2b Answer Of0 600 & aun a PROBLEM 19: Leis Ret hes two stores, M and N. Store had sales of P'180,000 during March, a s¢ nit ” ania tr ible ) eee ‘The compely as a whol tad a tion margin ratio of 25% aiid P120,000 in total contribution "Bagedon this ifidtiation, iptal.variabid exéhses in St the month must have) a es 2 tava eaidnses in StarGate mont must hays, PERSE Answer:__\/20, 01%, a — a Ee \ t «> "The wagedy ig life doesn't lie in not reaching your goal. The tragedy lias in iavingino goal to reach.” | Benjamin Mays ms Wr9.09) 9B Yeon 9 o> REM