COLEGIO DE DAGUPAN

Arellano Street, Dagupan City

School of Business and Accountancy

MANAGEMENT ACCOUNTING 1
Second Semester, AY 2018-2019
Semi-Final Examination – Set (A)

Choose the BEST answer. Encircle the letter of your answer. No erasures allowed.

1. Return on investment (ROI) is a term often used to express income earned on capital invested in a
business unit. A company’s ROI would be increased if sales
a) increased by the same peso amount as expenses and total assets increased.
b) remained the same and expenses were reduced by the same peso amount that total asset
increased.
c) decreased by the same peso amount that expenses increased.
d) and expenses increased by the same percentage that total assets increased.

2. The least complex segment of area of responsibility for which costs ate allocated is a(n)
a) profit center
b) investment center
c) revenue center
d) cost center

3. Which of the following performance measures will decrease if the minimum required rate of return
increases?
Return on
Residual
Investment Income
a) Yes Yes
b) No Yes
c) Yes No
d) No No

4. Which of the following would not be included in operating assets in return on investment
calculations?
a) Cash.
b) Accounts Receivable.
c) Equipment
d) Factory building rented to (and occupied by) another company.

5. The following data relate to the Happy Division of Euphoria Company:

Sales P10,000,000
Variable costs 3,000,000
Direct fixed costs 5,000,000
Invested capital 8,000,000
Allocated actual interest costs 800,000
Capital charge 12%

The divisional return on investment is:

a) 15%
b) 13%
c) 25%
d) 20%

4. Scotch Co. has the following results for the year:

Sales P740,000
Variable expenses 260,000

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 Fixed expenses 300,000
Total divisional assets average P1,000,000. The company’s minimum required rate of return is 14
percent.
The residual income and return on investment for Scotch are:
RI ROI
a) P36,000 36%
b) P40,000 18%
c) P36,000 18%
d) P40,000 36%

5. The following data ate available for the South Division of Banawe Company and the single product it
makes:
Unit setting price P20
Variable cost per unit P12
Annual fixed costs P280,000
Average operating assets P1,500,000
If South wants a residual income of P50,000 and the minimum required rate of return is 10%, the
annual turnover will have to be:
a) 0.32
b) 0.80
c) 1.25
d) 1.50

6. Channing Company has two divisions, S and T. The company's overall contribution margin ratio is 30%
when sales in the two divisions total P750,000. If variable expenses are P450,000 in Division S, and if
Division S's contribution margin ratio is 25%, then sales in Division T must be:
a) P75,000
b) P150,000
c) P225,000
d) P300,000

7. Domingos Company has two product lines, C and J. Line C has sales of P100,000 during March, a
segment margin ratio of 19%, and traceable fixed expenses of P20,000. The company as a whole had a
contribution margin ratio of 25% and P105,000 in total contribution margin. Based on this information,
total variable expenses for product J must have been:
a) P61,000
b) P176,000
c) P315,000
d) P254,000

8. Bennett Company has two stores, P and Q. During April, Store P had a segment margin of P8,000 and
variable expenses equal to 65% of sales. Traceable fixed expenses for Store Q were P18,000. Bennett
Company as a whole had a contribution margin ratio of 40%, a combined segment margin of P20,000,
and sales of P180,000.

Given this data, the sales for store Q were:

a) P157,143
b) P60,000
c) P30,000
d) P120,000

9. Quinnett Corporation has two divisions: the Export Products Division and the Business Products
Division. The Export Products Division's divisional segment margin is P34,300 and the Business Products
Division's divisional segment margin is P86,700. The total amount of common fixed expenses not
traceable to the individual divisions is P95,600. What is the company's net operating income?
a) P216,600
b) P121,000
c) P25,400

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 d) (P121,000)

10. Last year a company had sales of P400,000, a turnover of 2.4, and a return on investment of 36%.
The company's net operating income for the year was:
a) P144,000
b) P120,000
c) P80,000
d) P60,000

11. Cabot Company had the following results during June: net operating income, P2,500; turnover, 4;
and ROI, 20%. Cabot Company's average operating assets were:
a) P50,000
b) P200,000
c) P12,500
d) P10,000

12. The following information pertains to Quest Company's Gold Division for last year:
Sales ............................................... P311,000
Variable expenses .......................... P250,000
Traceable fixed expenses ............... P50,000
Average operating assets ............... P40,000
The Gold Division's return on investment is:
a) 10.00%
b) 13.33%
c) 27.50%
d) 30.00%

13. The following information is available on Company X:

Sales ........................................................... P90,000
Net operating income ................................ P3,600
Average operating assets ........................... P30,000
Stockholders’ equity .................................. P25,000
Minimum required rate of return ............... 10%
Company X's residual income would be:
a) P1,100
b) P5,400
c) P360
d) P600

14. The following information relates to last year's operations at the Bread Division of Rison Bakery, Inc.:
Residual income ............................ P12,000
Net operating income .................... P60,000
Sales ............................................... P300,000
Average operating assets ............... P400,000

What was the Bread Division's minimum required rate of return last year?
a) 12%
b) 4%
c) 15%
d) 20%

Use the following to answer questions 15-16:

Miller Company has two sales areas: North and South. In June, the contribution margin in the North was
P50,000, or 20% of sales. The segment margin in the South was P15,000, or 8% of sales. Traceable fixed
expenses are P15,000 in the North and P10,000 in the South. During June, Miller Company reported
total net operating income of P26,000.

15. The total fixed expenses (traceable and common) for Miller Company in June were:

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 a) P49,000
b) P25,000
c) P24,000
d) P50,000

16. The variable costs for the South in June were:

a) P230,000
b) P185,000
c) P162,500
d) P65,000

Use the following to answer questions 17-18:

Brandon, Inc. has provided the following data for last year's operations:
Sales .......................................................... P100,000
Net operating income ................................ P6,000
Average operating assets ........................... P40,000
Stockholders’ equity .................................. P25,000
Minimum required rate of return ............... 10%

17. Brandon's residual income is:

a) P2,000
b) P4,000
c) P3,500
d) P2,500

18. Brandon's return on investment (ROI) is:

a) 6%
b) 10%
c) 15%
d) 24%

Use the following to answer questions 19-20:

Data pertaining to Mar Co.'s Alo Division for last year follows:
Sales ............................................................ P100,000
Variables expenses ...................................... P60,000
Traceable fixed expenses ............................ P10,000
Average operating assets ............................. P20,000
Minimum required rate of return ................. 12%

19. Alo's return on investment was:

a) 60%
b) 75%
c) 138%
d) 150%

20. Alo's residual income was:

a) P27,600
b) P30,000
c) P32,400
d) P40,000

Use the following to answer questions 21-24:

The following data are for the Akron Division of Consolidated Rubber, Inc.:
Sales .......................................................... P750,000
Net operating income ................................ P45,000
Stockholders’ equity .................................. P75,000
Average operating assets ........................... P250,000

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 Residual income ........................................ P15,000

21. The margin used in calculating the return on investment for the past year was:
a) 6.00%
b) 8.67%
c) 10.00%
d) 8.00%

22. The return on investment for the past year was:

a) 6%
b) 30%
c) 18%
d) 26%

23. The turnover used in calculating the return on investment for the past year was:
a) 1.4
b) 3.3
c) 10.0
d) 3.0

24. The minimum required rate of return used in calculating the residual income for the past year was:
a) 30%
b) 12%
c) 15%
d) 6%

II. Dizz Wares is a division of a major corporation. The following data are for the latestyear of operations:
Sales ................................................................................. P10,890,000
Net operating income ...................................................... P609,840
Average operating assets ................................................. P3,000,000
The company’s minimum required rate of return ........... 16%
Required:
a. What is the division's margin?
b. What is the division's return on investment (ROI)?
c. What is the division's residual income?
Level: Easy LO: 2,3
Answer:
a. Margin = Net operating income ÷ Sales = P609,840 ÷ P10,890,000 = 5.6%
b. Turnover = Sales ÷ Average operating assets = P10,890,000 ÷ P3,000,000 = 3.6
c. ROI = Net operating income ÷ Average operating assets = P609,840 ÷ P3,000,000
= 20.3%
d. Residual income = Net operating income - Minimum required rate of return ×
Average operating assets = P609,840 - 16% × P3,000,000 = P129,840
118. Ferrel Wares is a division of a major corporation. The following data are for the latest
year of operations:
Sales ................................................................................. P25,550,000
Net operating income ...................................................... P1,149,750
Average operating assets ................................................. P7,000,000
The company’s minimum required rate of return ........... 14%
Required:
a. What is the division's return on investment (ROI)?
b. What is the division's residual income?
Level: Easy LO: 2,3
Answer:
a. ROI = Net operating income ÷ Average operating assets = P1,149,750 ÷
P7,000,000 = 16.4%
b. Residual income = Net operating income - Minimum required rate of return ×
Average operating assets = P1,149,750 - 14% × P7,000,000 = P169,750

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