Correll Company has two divisions, A and B. Information for each division is as follows: $\begin{array}{lcc} & \underline{\text { A}}& \underline{\text { B}}\\ \text { Net earnings for division } & \$ 40,000 & \$ 260,000 \\ \text { Asset base for division } & \$ 100,000 & \$ 1,200,000 \\ \text { Target rate of return } & 15 \% & 18 \% \\ \text { Margin } & 10 \% & 20 \% \\ \text { Weighted average cost of capital } & 12 \% & 12 \% \end{array}$ -Refer to the figure.What is EVA for Division A?

A) $15,000 B) $25,000 C) $28,000 D) $40,000 A) $15,000 B) $25,000 C) $28,000 D) $40,000

The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for Engine Division are as follows: \[\begin{array} { l r } \text { Direct materals }&\$600 \\ \text { Direct labour } & 1,200 \\ \text { Variable overhead } & 300 \\ \text { Fixed overhead } & 150 \\ \text { Market price per unit } & 2,730 \end{array}\] -Refer to the figure.What is the best transfer price to avoid transfer price problems?

A) $600 B) $1,800 C) $2,100 D) $2,730 A) $600 B) $1,800 C) $2,100 D) $2,730

The Framing Division provides frames for the Tractor Division of a company.The standard unit costs for the Framing Division are as follows: $\begin{array}{llr} \text { Direct materials } &\$800\\ \text { Direct labour } &1,500\\ \text { Variable overhead} &400\\ \text { Fixed overhead } &350\\ \text { Market price per unit } &4,575\\ \end{array}$ What is the transfer price based on full cost plus a markup of 20 percent?

A) $3,240 B) $3,660 C) $4,575 D) $5,490 A) $3,240 B) $3,660 C) $4,575 D) $5,490

Correll Company has two divisions, A and B. Information for each division is as follows: $\begin{array}{lcc} & \underline{\text { A}}& \underline{\text { B}}\\ \text { Net earnings for division } & \$ 40,000 & \$ 260,000 \\ \text { Asset base for division } & \$ 100,000 & \$ 1,200,000 \\ \text { Target rate of return } & 15 \% & 18 \% \\ \text { Margin } & 10 \% & 20 \% \\ \text { Weighted average cost of capital } & 12 \% & 12 \% \end{array}$ -Refer to the figure.What is EVA for Division B?

A) $44,000 B) $116,000 C) $144,000 D) $216,000 A) $44,000 B) $116,000 C) $144,000 D) $216,000

The following information pertains to the three divisions of Marlow Company: $\begin{array}{lrrr} & \underline{\text { Division} X} & \underline{\text { Division } Y} & \underline{ \text { Division Z }}\\ \text { Sales } & ? & ? & 1,250,000 \\ \text { Net operating income } & \$ 36,000 & \$ 25,000 & \$ 75,000 \\ \text { Average operating assets } & 300,000 & ? & ? \\ \text { Return on investment } & ? & 20 \% & 15 \% \\ \text { Margin } & 0.10 & 0.05 & ? \\ \text { Turnover } & 1.5 & ? & ? \\ \text { Target ROI } & 15 \% & 12 \% & 10 \% \end{array}$ -Refer to the figure.What are the sales for Division Y?

A) $25,000 B) $125,000 C) $208,333 D) $500,000 A) $25,000 B) $125,000 C) $208,333 D) $500,000

The Kelly Division of Zimmer Company sells all of its output to the Finishing Division of the company.The only product of the Kelly Division is chair legs that are used by the Finishing Division.The retail price of the legs is $20 per leg.Each chair completed by the Finishing Division requires four legs.Production quantity and cost data for the current year are as follows: $\begin{array}{llr} \text { Charr legs } &30,000\\ \text { Direct materials } &\$135,000\\ \text { Direct labour } &\$90,000\\ \text {Factory overhead ( \( 25 \% $ is variable) } &\$90,000\\ \text {Operating expenses ( $ 20 \% $ is variable) } &\$150,000\\ \end{array}\) Compute the transfer price for a chair leg using: a.Market price. b.Variable product costs plus a fixed fee of 20 percent. c.Full cost plus 20 percent markup. d.Variable costs. e.Full cost plus 10 percent markup.

a.$20 b.1.20 * [$135,000 + $90,000 + (0

Exam 10: Responsibility Accounting,performance Evaluation,and Transfer Pricing

Hasslehoff Inc.is a multinational company with divisions around the world.Division A in the United States purchases a part from Division G in Canada.There is no outside market for the part because it is used to manufacture another product.The manufacturing cost for the part is $5.Transportation is $1,and commissions are $0.50 but do not need to be paid. What is the transfer price using the cost-plus method?

(Multiple Choice)

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Question 21

What are transfer prices?

(Multiple Choice)

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Question 22

What are negotiated transfer prices?

(Multiple Choice)

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Question 23

Which of the following would increase return on investment (ROI)?

(Multiple Choice)

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Question 24

Which of the following is a political or legal factor affecting performance evaluation in a multinational firm?

(Multiple Choice)

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Question 25

When there is an outside market for an intermediate product that is perfectly competitive,what is the most equitable method of transfer pricing?

(Multiple Choice)

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Question 26

Correll Company has two divisions, A and B. Information for each division is as follows: Net earnings for division \ 40,000 \ 260,000 Asset base for division \ 100,000 \ 1,200,000 Target rate of return 15\% 18\% Margin 10\% 20\% Weighted average cost of capital 12\% 12\% -Refer to the figure.What is EVA for Division A?

(Multiple Choice)

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Question 27

If a company has sales of $2,500,000,net income of $250,000,and an asset base of $1,250,000,what is its return on investment?

(Multiple Choice)

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Question 28

Hasslehoff Inc.is a multinational company with divisions around the world.Division A in the United States purchases a part from Division G in Canada.There is no outside market for the part.The part is sold for $12 and normally receives a 20% markup on cost. What is the transfer price using the resale price method?

(Multiple Choice)

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(72)

Question 29

The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for Engine Division are as follows: Direct materals \6 00 Direct labour 1,200 Variable overhead 300 Fixed overhead 150 Market price per unit 2,730 -Refer to the figure.What is the best transfer price to avoid transfer price problems?

(Multiple Choice)

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Question 30

What is the term for after-tax operating profit minus the total annual cost of capital?

(Multiple Choice)

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Question 31

The Framing Division provides frames for the Tractor Division of a company.The standard unit costs for the Framing Division are as follows: Direct materials \8 00 Direct labour 1,500 Variable overhead 400 Fixed overhead 350 Market price per unit 4,575 What is the transfer price based on full cost plus a markup of 20 percent?

(Multiple Choice)

4.9/5

(80)

Question 32

Correll Company has two divisions, A and B. Information for each division is as follows: Net earnings for division \ 40,000 \ 260,000 Asset base for division \ 100,000 \ 1,200,000 Target rate of return 15\% 18\% Margin 10\% 20\% Weighted average cost of capital 12\% 12\% -Refer to the figure.What is EVA for Division B?

(Multiple Choice)

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(71)

Question 33

The following information pertains to the three divisions of Marlow Company: Sales ? ? 1,250,000 Net operating income \ 36,000 \ 25,000 \ 75,000 Average operating assets 300,000 ? ? Return on investment ? 20\% 15\% Margin 0.10 0.05 ? Turnover 1.5 ? ? Target ROI 15\% 12\% 10\% -Refer to the figure.What are the sales for Division Y?

(Multiple Choice)

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Question 34

What are both revenue centre and profit centre managers responsible for achieving?

(Multiple Choice)

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Question 35

Which of the following would be a reason that managers would provide good service?

(Multiple Choice)

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Question 36

Which are examples of perquisites?

(Multiple Choice)

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Question 37

If the turnover increased by 30 percent and the margin decreased by 30 percent,how would the ROI respond?

(Multiple Choice)

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Question 38

The Kelly Division of Zimmer Company sells all of its output to the Finishing Division of the company.The only product of the Kelly Division is chair legs that are used by the Finishing Division.The retail price of the legs is $20 per leg.Each chair completed by the Finishing Division requires four legs.Production quantity and cost data for the current year are as follows: Charr legs 30,000 Direct materials \1 35,000 Direct labour \9 0,000 Factory overhead ( 25 \% is variable) \9 0,000 Operating expenses ( 20\% is variable) \1 50,000 Compute the transfer price for a chair leg using: a.Market price. b.Variable product costs plus a fixed fee of 20 percent. c.Full cost plus 20 percent markup. d.Variable costs. e.Full cost plus 10 percent markup.

(Essay)

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Question 39

What is the "floor" in transfer pricing?

(Multiple Choice)

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(83)

Question 40

What are transfer prices?

What are negotiated transfer prices?

Which of the following would increase return on investment (ROI)?

Which of the following is a political or legal factor affecting performance evaluation in a multinational firm?

When there is an outside market for an intermediate product that is perfectly competitive,what is the most equitable method of transfer pricing?

If a company has sales of $2,500,000,net income of $250,000,and an asset base of $1,250,000,what is its return on investment?

What is the term for after-tax operating profit minus the total annual cost of capital?

What are both revenue centre and profit centre managers responsible for achieving?

Which of the following would be a reason that managers would provide good service?

Which are examples of perquisites?

If the turnover increased by 30 percent and the margin decreased by 30 percent,how would the ROI respond?

What is the "floor" in transfer pricing?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

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