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    CH 13- PERFORMANCE MEASURES

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    CH 13 - Performance Measures

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    Accounting Stuff

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    CHAPTER 13, PERFORMANCE MEASURES ‘THEORIES: 2. Deentaization asus when ‘eis operations ere lca over a larg geographic arto reduce sk Betty for important dessins is delegate to lower regmers of the Cc. itporet decors are made a he per lets and the ower eves of he tryariaton ae response for implementing te deiions . sone ofthe give ches 2 Way woulda company adopta decentalize organization? 9 tain and motte divsion managers fo focus tp managements stenton operating decison CC toallow division managers o concent on state planning D. alle the given choices, %.Tnseapansliy accounting the mest rolvant clasiaton of costs 1 ncementalendroipremental bcresonary and commited ‘outlableandnoncntolabe 4 Consotbe cons are Conte that Scat kn total in segpone os changes in the rte of cepa ato. iv tht wl be unaffected bycutent manage decons Cnt that management decides to natn he arent pro eable the Company to achieve apectves other tha lg csomer over 6 ‘Costs that are Likely to respond to the amount of atention devated to them ly aspectiod manager 5. Thetern Gai ann uns fen med to dene fa a C, profteentn D tontcenter > ow 6 Consistency between goal ofthe im and the goals ofits employees: ‘AD goal eptinization @ 10, n sslcongrucce foal conformance D: gealcomperation eae a : syste ha 2, en Conn on 2 pee Pe peel et fey nn on eo asf exch aborts ho eerste AE TSG Freire "The data peso show te accom cured during Bo {he gee cont and all vores fom boda fr ‘department. The Three Company is wsing a type of system ‘Ar Fleablbodgring Consus badging © Resporaay scouring B. Contre scountng ‘When used for performance eval tin ae feces eae remo oraiticaegeaae os a “C. include variances between actual and budgeted cc one ; Sterne vidual manager who ‘The acumen of accountng data on se bai of he nul manages who thas the authority to nike day-to-day decisions about activites called ‘A. satic reporting. ‘ibe accountng. ‘espocloly accounting master budgeting, ‘An emphasis on obisining_goal congruence is consistent with a broad ‘managerial approach called A. management by ‘management through goal congruence DL justine philosophy ‘Which ofthe followings nota true statement? ‘AL Many costs are conllabe some evel within a company. ‘espunaiy accoumng apps a ens, “Fewer cos are contol ar oe moves up 0 ech higher level of Spel pont. > ee %s semetnes ed to dey wae of ‘esponsibility decentralized operations, 322 GA nunaenent tion ou eel rage pri cee et 1% 1s, w, {Beenie company. From the overall company views decion wold A. elcome ‘envaliation D. maximisation Tho sequonce ht fects reat of A. caterer vestmentcnes prlteenst ne ‘ostcemer, prof cemer veer cent rot one crt center investment ca '. lrvesten corer, ot cots, prot crt A profit cener is ‘A srspnstbty center hat rays report pref. e ‘a responsibility center that incurs costs and, ne tes revenues. tated bythe rate of retin ered on Se RTOS aed othe . refered to as fone center when operations do not met the com opera npany's ich of the fodowing woul be the best mensare of performance fra pect ‘AD Residual icone Retum on investment (RO) Segment margin, Economic value added (EVA) paw ee eae = a eae ene apna! (CVP) analysis and special order decisions. i rere es ee eieciegsem rity Leoceceie e Inthe dectonaking proces hich che towing tgs would hx Sey ange srg’ sgl naa ae ld ‘in ira omen oom where at tetine spec ede fora cser ‘should be accepted, ne 3 Tecate the bake point for the ups meth 329 ® ® te Ete decln n whether or nat an Ge ptt aoe 1 eens peng “omrtne condone an pay were cet st byte poem EPS Sp on rn emt pe ces ne Sree tenn ddeace Semone ges ream em rpc : Ceeinesesrets dma team n botocrs causes ‘Rr Personnel departnnt eee oie Sr neanenniaren dingy oan tne et 1 ttn Seneca Tp ofthc eed tease she eer ‘Fils eresponlity center hich only generates revere cs enti rome PRET ee SE ee shouldbe used fo compare past performance with cent performance 1D. motivate peopleto workin the company’s estinterest alt In responsibilty scounting syste, the proces in which» supervisoe and & Sublime indy determine the borin goals and pln or achieving Ths oasis 2 Popo budgeting & impoed badging C Batomapbed Mantes Internal ports prepared under the esponsiity scouting approach shoud linked the he flowing cose (On eal cots & Seine 1. Only cont popecyalbcble to the cst centr under geri cepted accounting principles. * me ‘Of mest relevance in deciding how or which costs should be signed (0 % export ener the degree of Causey Di. Vasily Assuming tat sles and pot income remain the sme, n company’s Zuo tnoestmet wl en vested capital increase cone invested cop decresee (ecm te verted eapta-employed tuover rate decensr © Sere fhe nested capa-amplyed taover rate erases “The best measure of the performance ofthe manager of profit center is the IR nate cecum on ivestment. SS incesing budgeted gol for contoabe cons ‘oun oases geerted bythe pit cet Secatsof Seber agin ener y Che profit eter “The ws of residual income for evaluating performance 1h penalise managers whose segment fave lw ROS penalizes managers of rlivly large segment & secu marge © sini pss of prot far a ose HOM been achieved encourages manages to maxmiat ROT fr the company ther vals remaining constant if vision doubles is investment tamover, ROL wl ‘A. decease incre © sane ‘A te alvays the best measure of divisional performance |B denotes good a mennue of performances KOI ‘veremes somo ofthe problems associated with ROL ona be weed ty dvisons hat don with others in the same company Other factors remaining unchanged, the rate of return on investment may be improved by ‘Ar incr investment in assets 1 increasing expenses. 35 reducing sles (Bis decreanng vestments. ‘A measure frequently wed to evauate the peso Fete a Th the anoant of profit gen {Be rato etm on funds invested in he cent ‘he peromage increas in prefit over the previous 72 1D. departsental gross profit. i mance ofthe manager of cont ret income coma de (VA ‘CG nmum eit um named cot ae & Sie onctepalmsctt meio t Srepuntotne 5, Sols deerained yng coveted ecomsing et 4 i ‘nthe formula fr ROL ile Jeame ‘A included inthe caclatin of controle margin. 1B included in the ealealaton of operating ase. @ Sele inecasaion of saa i ‘cluded from total assets. ‘An eduantoge of residual income is that @) encourages marge o cep poets which provide sums ines ‘hecompany's eqs 1. stencourages managers toate to increase wel turnover (Citencourages manages toate increase the arg D, allofte given hates Toner to promote gol congruence «manager ofan inmesiment centri best cvalated wang ‘Ar andar variable costing income statements & rerumoninwestment trudge and standard costs residual income How can an investment enter nprove its retro investment (RON? A increase magi Increase invetents TA decrease margin, decrease turnover ieee marin nee none ‘A company bas computed that teks “margin i 18. Which of the following ‘stems the bt interpretation of hese resus? 326 a. A, P18 of evry tivated in asi et profit @ Pitotevey Pome mses prot Brey ssed ssc gees PB sales even 1, Hvar Pl imesed insets pees PIB of een! mn When comparing two diferent investment alates, which ofthe folowing Ipenrues foreach aeratve would be te bet oe? Gteneniermet kewialicone ©. Netincome . Contibation margin rato ‘Which of he folowing stations is ost My to ase a prables fr companies {hat use ehimon ineestnent (2 as amearare of « managers pecfomance? ‘Managers may be encouraged fo purchase more opening eset than they ‘others could. ‘ Mangers ye scourge rom pasing opening ast tat cold c D>. gute vel pony ‘Managers aye couraged fom reducing thes Avion ors ‘Manages may be discouraged fom paying off dee in cedar to reduce forest cet ‘Al es bing equal which ofthe following tems would nse «company’s ‘urmon vestnent ROM? sane ‘RA dase ninco , an inerase in ned on ‘Aeeurasein erage opting an > Adcussirauervene uch of he flowing stamens comparing ROL and rl ce ‘A. ROL is more usfuas perfomance mansue fora single investment center, 1. Residual income sa beter compari measure than ROL, © ROL and raidaa! income are eqaly good performance messes for & single investment centr Basal income Is more ysfulas.a performance measure for «single ‘he coc) of waster ng (ee) fone eenwees 1 fo provide an incentive fer manages o make dcsions consistent wi fens goals zie . toprovides bass for aly evarting the managers East pen chr oor dente tmnt toni Sn te St ey ‘puadvanng afer cessed nat atin 8 Dindetosng he incenve of managers of spplying divisions contol gy, 7 on effici or. iencies of supplying divisions to 2 ng ns tin of tg ton eg © tetrcies disadvantages D. thane advantages. “The gee rule in establishing tnafer pices thats consent with conn : eo Been eupmemrettn ice ot eeegeen tt cnn ey § Sumo Se Esmee Praca re Soames 46. Negoistd transfer pics are appropriate when: “Seer are cstasings to he ling division thre wo extemal matt pice the tena markat price reflec abepain pice, 6 See @ To-avoid waste and maximize efficiency when trensferring products among “Tiasions in competive economy, lage diversified corpration shuld bat trasfer prices on fullest variable cost replacernent cost market pice 48 an intermediate mashetesis, the optimal tanafer price the: "Ar oatay cost fr producing he gooas———— 3. opportunity costo not seling wo the outside market. 328 a eatin ee ht eng ype ne pa mg division to be efficient? —e Se maniac & tees tees 2 ene, SSO lesen pe eer A regotaed talon ping system i et up where ‘A he bro segments cannot age ona pie an the dfeence between them is abiorted by thehome office ready mat prices not avalble end the two sides mast come up with Snagemable price ebayer Buje sul cot andthe eller ony sels ful cost 1. the ord segaents agra to use a coat ass or araer pricing “To minimize tne, some multinational companies ctw taneer pies ‘8. when goods ee shipped fem low tx counties to other low tox courts Twhea goods af hipped from low tx countries t igh tx counties /C) when goods are shiped from hgh x course tx counties {ny of the given choir ‘Acompany may consider sing xasablecons in tanar ping when there ‘A. excess copacty because varie costs would stay te sae 1 nocxcae capacity tecauce vanable corte would not tay thesame T encees pasty because feed costs would stay the same ‘Ro excsscapacty because fixed Cts would Hay tha tae ‘The minimum taster pie fom the elles standpoints market price when excess capacity exets basket price when exces capacity does not exist C. ncrenenial costs whea exes capacity doesnot ents DL any ofthe given choices “The munimusntranfer price shouldbe the editional cos plas: &) epporny cnr sting son epporunity cost or buying division CC opportunity cost forthe company a whole D._ashare on selling division's fed costs : setevant 16a decision bythe divisional many wich am a a meat prc tered te eying i one cooler Ey cos A ore manatcaing ose Fred dina a spe wo ae ping eo iat ase te pte on Tart pices Pr Sodgted tal costs edited vara costs G weatliontcors Whats the most important purpose of a balanced scorecard? A Delp setegy Petco noe dt inages B Mesut pcormace 5 Sports seo the owing foe of marae compen os ly if he long vow oho a eomane Swi eee tacoma? see aca toms S Stay @ Stock options Sie lecapeyar hich of fllowing statements regarding the balznoed scorecard apron fale? root cause of changing technology, global competition and an ince enon ft eed Ww oof comer Teh eta wetitane performance measures have Become an ital compre Hectve managerial decision making, B, ihe alan scorecard approach integrates both financial and nenfren formance measures, cee glaed scorecard approach requires looking at perfomfance frm ow different but elated perspectives ostomer, internal busines and learning and growth. Dee Stnce scorecard approach is not ab useful for petfrbany measurement as traditonal accounting measures about the balanced scorecard apprachis tut! :hof the following statements. ‘Which of thefllowing ie ea ‘A. Ithelps management focus ono 330 a. G eins nraenentons on ita scar which may be anc and nonfinancl in nature. CC It helpe management ignore short term operating performance in favor of lang-term operating performance. D. Ithelps management focus on ny franca measures of performance. Which ofthe following statements about the talanced scorecard approach is falser Ci tears maoges ofc on fn metres more han nok B._tlooks at performance from the following perspectives financial customer, internal business, and leaning and growth. (©. Ithelps balance shorter vith long-term strategies. D. It recognizes tht tadiional measues of performance are often not P sdqusteto fully aes a company’ performance. — Wich ofthe folowing statement str regen more atonal measures of ‘ancl performance! 1h They often ook a company's performance fom fou feet but elted pevpecives franca) customer, infernal basins and leuming and govt 1. hey ae often superior to measuring «company’s performance tan the telanced scorecard approach (© Festrmoce poems ar often ot apenas timely a fashion a wi Ee blanced soreced approch. They tend to focus on nofinancal rather thin nancial measures of pevormance. vii of be oliowng quests woul te ns arc of he red tarcardotenpttsutre "Sow dese company onus npr, am and pow? tev aseatoscrttew heconpayt ilk bane proces mut copay How deere company cat avers delet Which of the following questions would the internal sis perspective ofthe Tlenced scorecardatemptioanswe? ‘A. How does the company continue to improve, ltr, and grow? ‘BL How do customers view the company? GP Which basnessprocetses mst the company excel in? 1B. How does the company crest value for is stakeholders? ‘Which ofthe following questions would the ring and pth perspecie ofthe balanced scorecard attempt to answer? 3a n ic sie processes Ces the company cree van of bait guns weld De we aemtto aoe? cr ang conn inprovand er? How ems he company? Ho dct ie comany lit We i ey eae rials? ee of pestrmana return on invesinent (ROD) # © measure ae Reet ofthe bled sonar? ig Fra bsiess B casoner Franca ening a grow evrmining he met hare fra compay’s product would bea Sng to re eerspecive ofthe balanced scorecard? Real buses Catoner @ fecal D. Leuming nd owes ‘Thvoughput would be a measure of performance under which perspective fy ced scorecard? “ernal process Customer © Financial D._ Learning and growth Increasing information lites would be a critical success face found in which perspective ofthe balanced scorecard? vale for its stakeholders? By taming a growth ‘Which perspective links the ertcal success factors ofthe other perspectives ard ensures an environment that supports and allows the objectives ofthe oe: perspectives to be achieved? ‘A. Biancal perspective 392 CBD tesning aed growth perspective Internal business perspective ‘D. Customer perspective 72. Which of the following is least Ukely to be critical sucess factor within the ‘Bnancial perspective of the balanced scorecard? ‘A. increasing ROT B. decreasing operating costs decreasing residual income increasing segment margin 73. Which of the following might be « performance measure forthe financial perspective of balanced scorecard? Ar tpercertage of ovine deliveries bythe ngazation B,_ percentage of product defects © feumonasses SB percenage of marketshare el by the organization 7A: The initiative to reduce nonszalue added activity meets which balanced sconecard ‘internal operations perspective customer perspective C. fnancial perspective learning and growth perspective 75, ‘Tho balance scorecard internal opsmation perspective incdes ‘A. customer complaints @ ‘number of engineering changes markt ahare D. ventory tumover 76. Song balanced objectives, seing target lus, and aligning rewards are Testy leon eating balanend cared B. inportt aspects ofthe copia budget prowess the ear of process anovation D, the ingredient for economie forecasting 77. The raoure ulled by 0 given product divided by the toa amour ofthe 333 7. m. 2 ivery performance declines by: ‘A, Anereasing cycle time decreasing cle time C. increasing velocity D. decreasing tumaver Marisfacuring eye efficiency shouldbe iereased by employing which of ty Tustin Time Fexible Batch Inventory Manufacturing Systems © Manufacturing A YES xs 1s Yes ves NO e % © % D. YES No YES ‘Which ofthe following items used wo measure customer response fie woul et be sed to incre ces ne compe pa, 2 Tame spent wating fra machines vain Tine spent napctng te materi for galt comtal. (> Tiespant dang te produto cater ‘The tal time a product isin production, including process time, inspection ‘ime, wi called: AL efficiency time anufacturingcvele tine. ‘ustomer response tie. 1D, valuoadded time. tes that prevent the organization fom ataining «higher level of echievement within its Value chin are called the Ry theory of consents val chain CC atagic cost managenent D._costmanagement systems ‘The period that begins with the arzival of materials and ends with the Shipstentaf a completed goods refers to A performance period B. Computer integrand manufacturing, Cmansfaturing eel © sisting 334 i 8. 8. eochmhing slows manages ‘A determine wh nh Ocuty performs mtr process mos B. determine te procooe tuthavehgh letoeonseaeonie <> complet eri intemal proces evi nd aces to et of ober companies inorder to Sent serge weno D. reproduce olen compara. dan and. manutchring cee tlimnat compentive Svatage ‘The proces of comparing investigating and evaluating the company's polar pearance se ‘A aesabion B eedback product review GNenchnarting Which of the feowing statements bout preveton costs? ‘A. Prevention conte are generally incured afer problne cur 3B._Designand engineering cost are not propery cridered prevent coe Generally, companies find tat the icumence of prevention sn ede Iongaun ped faumects a D. None of tear tue Wich of hefatowing stems sos gully cst? 1a Sah enea ain eco eae eee Gosia tz) by peying more attention to quali issues cal inthe wslueain” lag expendi velaed to peenon anf spr neu a Spun otgacntergs a heater thay te pent incense eendutSroneormereeas oer Seneca @ Sivteewerae vii fh flowing semen’ abou quay ost? Meni hwy cellar csr neve be ede 250 i Thee compny spends om prevention css este wi ave 0 ‘pend on neal recs intete iPeompany produ an sls edctve produ exams ect Moar ale ober pero gully cone ‘ion kl of intea are co al er at ene tenon tests be pate prevention dap cr “Racing with no finish’ refers ‘A. developing the bestselling prodsct B. research and development (Gy percha and continous improvement. 398 1. designing the highest quality product in given Segmented mares coopany/s value cain flesh 50. company onal evel of authority and esponsibility, ._ No, benuse the prjets ROT es than he company’s cuentRO sae scion om a tara o Finished goods, ease Eo into astit esethe al fd rsig eaer re cone lk rbulon network fo the company’s procs andere 3B s0000) 5. Fisiou “The catent income for @ subunit is FOE, Is cues invested capital i PROBLEMS Poo. The bunts consdering to purchase for P00 an ep that : willincese anal ncae by an cstinteg 72800 The fms otf apa 1. The Dea Merced Company's Household Products Division reported in ay 40%, The fm reqs the diferent segments «mini o 0% ROL. Ihe rae its con, an ase urover rao of 30, and arate of warm. quent pore, te rida! come of Subunit wil ness by ‘assets of 18 pervent. The percentage of net income to sales ix vege A. P2800 c. PAOD Ae pecent ©. percent & risow De at D. Spercent 2 tees Lm ‘Consider the following: Use tie following information to ansoer questions 2 throwgh 6 inant cr ea prt rst se Conpony al flowing information peiring lo 209: Invertnent cent’ corrent abies Carty ny had the following . Weighted-averege cost of capital Png P 100000 Minium requied S01 Sule Pxtc0000 — What is the economic-value-added (EVA)? ‘est Tne ratio a et EVAR ap ‘The desired miinimum rate of return is 15 percent. BP 3200 ‘D. 50,000 Segment A gereted sles revenues of P0400 and varble operating 2, Ris theretun on investment? xpenses of £180,000. te controllable Sxed expenses were P40,000. It was A. 10percent C Wpercent assigned 20% of P200,000 of fixed costs controlled by others, The common fixed BS percent D. Ispercent ‘outs were P25 000, What was Segment A's controlable segment profit argin? a ema © eco 3, Whatis the retar on sales? 2 Pima D. eto AiO percent ©. percent & ‘Sperent D. iSpercmt ‘Thefotowing data ete tothe Moor Division of Earonan Compey Sales gto 4. Whatis the amount ofases? Varbl cost 3000080 i r0000 Promaw Diet ed cots Soonae0 fey 5 rou Ivete pial Sone z see ‘Allocated actual interest costs: 800,000 5. + The manager of Cary is pid «bons based on ROI Would the manager inet Capit charge ioe in prje that wl pay a Feturn on investment of 18 percent? edhiealtimenaemetis pects the projets RO exceeds the desired nin te of ream . oe Sinmer BL Yes, because the project's ROL is greater than the company's current ROL (C._ Yes, because the project's RO sequal than the company’s current RO! 336 hie merit trnver increased By 20% and ROS dees “572% oy increase by 6% Done ofthese sa We inementtuover dace iy 1% a RO dey 5, yy would 1h incense by 20% Be decrease by 37% rhe manager of te gerentor Division of Power Company Paling resus in 2008 (pesos i lions) PP by po Sera 9 Consens ee dew 4 = zB a en Fon ‘Working capital 4st Ea roterajeae3s Be “The division has a target ROL of 30 percent. He states thatthe sales nity relatively constant s0 variable costs and equipment should be close to ‘percent ofeales,fxed cost and plant and equipment should remain e nd working capital (cash, receivables, nd inventories) should vary coy with ale in the percentage reflected above. ‘The peso sales that the division needs in order to reach the 30 percent Rot targetis ‘A, P19 829,002 c. Po7ss0302 B Pasarssri D. Ps9510,000 ‘Question Nos. 14 through 16 are based on the following WR In. sells varity of drink and food produce including poato chi end sods. he segmented income statements fortes io product ares follows: —_ ‘Sales Paco” Pace eee 200000 S150 ribton margin 000 ‘A500 338, real ferret anop 1000 oe am = Baio 1s cntiering «cl arising coi et il a aria mgr ws memantine iy fi wl ig OEM Sta ys ts at te pag nk sar et Eig rc of eds ony 70D ‘What willbe the overall net effect on the company's total profits i the advertising focuses on sodas? ‘A. Increase of PI70000 BL increase of P150,000 C._nereace of 120,000 D. Increase of P200000 15. What will be the overall net effect on the company's total profits if he advertising, Focuses on chips? (A. Increase of PLB 730 B ncrease of P75; 000 C._ Inerease of PI7E 720 Increase ofP245, 000 16. Which of the following statements is true regarding which product the u a chips rather than sod, 1B. Overall company profits willbe higher by P28750 ifthe campaign features chips rather than soda. Overall company profits will be higher by P13750 ifthe campaign features, chips rather than soda D. Overall company profits wall be higher by F26,250 ifthe campaign features soda rather than chips 17, For the current year, Methapor, Inc. reported sales of P300,000 and an asset tumover of 2. The rate of retum on average lnvesied asets was 20%. The ‘company’s margin forthe year was ‘A. 10% ce 40% D. wx 18, Dea Apollo Company has the following information available for one its “division in the current year ‘Sales revenue -P6,000.00 Operating expenses +3.00,000 ‘Average operating asets 2.000.000 339 v. a. + yased on residual income. requires each ofits divisions to generate a minis, on Apolo iP Ne dots residual income? os rine a : 71450000 5 resco iter, nc bas the following formation aval for oes i “ireage operating ates ts ‘etunton investnent (RON Sonom e ct * Fsomom LF Liberty requires a minim neta on it vestments of 25%, wig i residual income? ‘A. P1,950,000 ¢. 6,750,000 B. 4,500,000 D. P 750,000 sre Vuve Dvr of nde Compe proces ll ive Bp various companies as a component part in their products a by rao cones sts sutononow tits Bing ie ae Coan oe ain png and oer desir ded ae Sef tin of ole 1 pret on pected 1 Enea hs aver opr noses of P7000 Dann He cic Fo per aan oad ot us copay o 30000 ls valves are sold for total P462,000 per year. The How many valves must the Valve Division sell each year to generate ty desired rate of return on its assets? ‘A 780,000 c. 355,385 B. 350,000 D. 265,000 Matipid Division of Expenditures Company expects the fllowing resus fr 2010: Unit sales 70000 Unit selling price P10 ‘Unie variable cost Po4 ‘otal fixed cost ‘Total fixed costs 300,000 Total investment 500,000 ‘The minimum required ROI is 15 percent, and the divisions are evaluated 'A foreign customer has approached Matpis PEinager with an offer to buy 10,000 units at P7 each If Mati ecceps Oe saree would not lose any of the 70,000 units at the regular price. Accepiy fhe crder would increase fixed costs by P10,000 and investment by P3000: 340 Whot is the minimus price that Mat Dini ts expecied rida! income? hl Sr the oder ant ‘F500 ©. P00 Bras ae oe swith an offer to buy 10000 units at P7 each Matpid Divine fe epee sain ley en pd Dota apa ‘Accepting the order would increase fred costs by PIOD00 and inmeroen ny rd ‘Atte price of P7 offered by foreign customer, wha ot whats the maxima tuts in regular sales that Matipid Division could sacri a xpecied esdual income? ne ‘AL 2333 © 3383 B 267 D. 3667 “Marsh Company tat had caren operating st of ne milion nd nt ome en milion ade {7200000 had an apport fo vet a peje at requ arson investment of P2500 and an incre in et nce TAO, Aer investment, the company's ROL willbe “ A 160% c. wz Bios Die ‘An appropriate trrafr price between two divisions ofthe Reno Corpor can be determined from the following data: bea es Fabrication Division ese oom MesiZcot of tubesenty Bo soar a avn Dvn Weber a en ede . ‘Whats the natural bargaining range forthe two divisions? ‘A. Between P20 and P50 B Any amount less than P50 Between P50 and P70 1, P50is the only acceptable price Company ¥is highly decentralized. Division X, which operating a capacity, produces a component that it crrently sells ina perfectly competiive market For P13 per unit, At the curent level of production the fixed cost of producing this component ls Pa per unit and the variable costs F7 per nit. Division Z aa would like t© purchase this component from Division X What price that Division X should charge Division 2? Would be, APT c Pn te BP DPs ‘Assume that Steal Division has a product that can be sotd

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