Chapter 9 Multiple Choice:

1. It is a subdivision of managerial accounting which relates reporting or performance

directly with the person who has the responsibility for its control. It is useful in assessing
the performance of persons responsible for controlling costs, revenues, or invested
capital and analyzing deviations from planned and prior performance.
a. Accounting systems design and installation
b. Cost accounting
c. Standard cost accounting
d. Responsibility accounting

2. It relates accounting to the budgetary system, thus acting as a control device.

Management reports give details of budgeted and actual performances and show
responsibilities at all levels of management.
a. Programming c. Responsibility accounting
b. Accounting system d. Budgeting

3. Which of the following statements is correct?

a. The direct cost of a particular department is always a controllable cost.
b. Responsibility accounting identifies cost, revenues and even capital investments with
individuals, e.g., managers, and thus provides for more control and evaluation of
performance.
c. All managers within an organization have equal authority and responsibility
d. Internal reports prepared under the responsibility accounting system should be
limited to only variable manufacturing costs.

4. B Company uses an accounting system that charges costs to the manager who has
been given the authority to make the decisions regarding the incurrence of such costs.
For example, if the Production manager was not able to monitor the efficiency of the
workers in his department, so that he was forced to ask them to work overtime to finish a
specific job on time, the additional cost of working overtime is charged to such Manager
or his department. This type of accounting system is known as
a. Transfer price accounting c. functional accounting
b. Responsibility accounting d. cost accounting

5. In a responsibility accounting system, costs are classified as controllable and non-

controllable costs, which imply that some revenues and costs can be changed through
effective management. Controllable costs can be described as including
a. Discretionary costs only
b. Prime costs only
c. Only those costs that the manager can influence in the current time period
d. All the costs that are directly traceable to the responsibility center
6. The basic purpose of responsibility accounting is
a. Motivation c. authority
 b. Variance analysis d. budgeting

7. The cost center is

a. The least complex type of segment or area of responsibility that is accountable only
for costs
b. An area of responsibility where the manager has the authority to make decisions
concerning markets and sources of supply
c. A responsibility center that is accountable for revenues (markets) costs (sources of
supply), and invested capital
d. An organizational unit that is responsible for revenues and variable costs, but not
invested capital

8. A service center is a segment of an organization which has the

a. Responsibility of rendering services to outside customers
b. Authority to provide specialized support or service to other units within the
organization
c. Responsibility to incur manufacturing costs to produce the company’s products
d. Authority to make decision concerning revenues and costs

9. Management by objectives (MBO) is a concept related to responsibility accounting. MBO

can be described as
a. A behavioral, communications-oriented responsibility approach to employee self-
direction
b. The process of preparing a series of multiple budgets for varying levels of production
and sales
c. The process of managing personnel
d. A means of evaluating long term-investments

10. Responsibility accounting works best in decentralized firms where the organization is
structured into responsibility centers. A responsibility center that is most like an
independent business is called a
a. Profit center c. cost center
b. Revenue center d. investment center

11. The format for internal reports in a responsibility accounting system is prescribed by
a. Management
b. The Philippine Institute of Certified Public Accountants
c. Generally Accepted Accounting Principles
d. The Board of Accountancy
12. Which of the following statements is incorrect?
a. A successful responsibility accounting reporting system is dependent upon the
proper delegation of responsibility and authority
b. Fixed cost can also be controllable, and some costs not controllable may need to be
assigned to a responsibility center
c. Controllability is the only appropriate basis for delegation of responsibility
d. The salary of the department manager is a direct cost of his department, but not
controllable by such manager

13. In responsibility accounting system, managerial performance should be evaluated on the

basis of those factors controllable or capable of being significantly influenced by the
manager. In a manufacturing firm, which of the following items is least likely to appear in
a performance report from a manager of one of the firm’s production departments?
a. Materials
b. Labor
c. Depreciation of the administration building
d. Repairs and maintenance

14. Vernie Company uses a responsibility accounting system for a planning, control, and
performance evaluation. Just recently, the company’s personnel department set the
conditions for working and paying overtime. During the month, the sales department
accepted a rush order from an important customer, and forwarded the production
request to the production department which processed the order and finished the same
on time, although its staff worked overtime. The overtime cost generated by the rush
order should be charged to
a. The personnel department
b. The sales department
c. The production department staff
d. The accounting department

15. When used for performance evaluation, periodic internal reports based on a
responsibility accounting system should not
a. Be related to the organizational chart
b. Include variances between actual and budgeted controllable costs
c. Include allocated fixed cost
d. Distinguish between controllable and non-controllable costs

16. The following costs may be controllable at certain levels of management within a
manufacturing concern except:
a. Insurance costs of plant and equipment
b. Power rates imposed by the electric cooperative or the power supplier in the area
c. Basic salary of factory workers
d. Monthly maintenance cost of factory equipment covered by an annual contract
17. The criteria for evaluating the performance of responsibility centers should be carefully
selected because
a. The responsibility centers’ managers may found out what they are
b. They must be approved by the BIR
c. Stockholders require an explanation about such criteria
d. The manager’s behavior can be affected by such criteria that are used to judge their
(manager’s) performance

18. When a responsibility center manager takes an action that benefits his/her responsibility
center, but not the organization as a whole,
a. The manager should be demoted
b. The responsibility center must be an artificial profit center
c. There is lack of goal congruence
d. Such action is a non-controllable action

19. To be effective, the criteria used to evaluate the performance of Boss, a manager of a
responsibility center should
a. Be known and understood by the boss
b. Include only those factors that are controllable by the boss
c. Not be influenced by actions taken by the other managers in the firm
d. All of the above

20. When using a contribution margin format for internal reporting purposes, the major
distinction between the department manager performance and department performance
is the
a. Direct variable manufacturing cost of the product being produced by the department
b. Direct or unallocated fixed cost of the department controllable by the department
manager
c. Direct fixed cost are controllable by others
d. Prime cost of the product being manufactured by the department

21. The segment of the Foot Spray Division of the Foot Care Inc. should not include
a. Fixed selling cost of the division
b. Central administration cost allocated to the division
c. Net sales of the division
d. Variable selling cost of the division

22. The performance of an investment center should be evaluated based on

a. Amount of investment
b. Return on investment
c. Residual value of investment
d. Average investment
 23. Which of the following formulas best describes the return on investment calculation?
A. return on sales x Assets turn over
B. Net income ÷ Sales
C. Sales ÷ Total assets
D. Sales x Profit Ratio

24. The ROI can be calculated using the Du Pont formula. A variant of this formula is return
on Equity (ROE) which can be calculated as
a. ROE = Profit/Sales
b. ROE = ROI x (Assets/equity)
c. ROE = Assets/Equity
d. ROE = ROI

Items 25 to 29 are based on the following information:

The following information pertains to the product produced by the Men’s Belt division of
Leather Goods Company:

Per Unit

Selling price P150

Manufacturing costs

Prime costs 75

Variable factory overhead 15

Fixed Factory overhead (total is P80,000) 8

Selling and administrative costs

Variable 18

Fixed (total is P60,000) 6

During the period, the division produced 10,000 units and sold 9000 units, both as budgeted.
There was 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. Central
administration costs are allocated to the different departments of the company. For this period,
central administration cost allocated to Men’s belt Division amounted to P150,000
25. How much is the Men’s Belt division’s manufacturing margin?
a. P378,000
b. P465,000
c. P322,000
d. P540,000
26. Men’s Belt Division contribution margin was
a. P378,000
b. P465,000
c. P322,000
d. P540,000
27. Assume that 40% of the division’s total fixed costs is controllable by the division
manager. How much was the division’s short-run performance margin?
a. P238,000
b. P322,000
c. P294,000
d. P540,000
28. Assume that 40% of the division’s total fixed costs is controllable by the division
manager. How much was the division’s segment margin?
a. P238,000
b. P322,000
c. P294,000
d. P540,000
29. How much was the division’s operating income during the period?
a. P238,000
b. P88,000
c. P322,000
d. P378,000
30. A profitable responsibility center classified as an investment center can increase iys
return on investment by
a. Increasing peso sales and operating expenses by the same percentage
b. Increasing peso sales and operating expenses by the same peso amount
c. Increasing peso sales and operating expenses by the same percentage
d. Increasing investment and operating expenses by the same peso amount
31. Return on Investment is a performance measure used for investment centers. Which of
the following statements about ROI is incorrect?
a. ROI is computed by dividing a segment’s income by the investment capital
b. ROI is subject to numerous possible manipulations of the income and investment
amounts, so that the manager may decide not to invest in a project that will yield
less than the desired rate of return, or he/she may defer necessary expenses just to
improve his/her center’s ROI
c. ROI is superior to the residual income control
 d. The use of ROI may not be appropriate when the average age of assets differs
substantially across segments of a business

Items 32 and 33 are based on the following information

The ladies’ belt division of Leather Goods Corp. is classified as an investment center.
For the month of November, it had the following operating statistics

Sales 675,000

Cost of Goods Sold 400,000

Operating Expenses 237,500

Total Assets 750,000

Weighted Average cost of capital 4%

Leather goods Corp’s average stockholders’ equity is P300.000. It is subject to an income tax
rate of 40%

32. What is the Ladies’ Belt Division return on investment?

a. 4%
b. 5%
c. 7.5%
d. 3%
33. The Ladies’ Belt Division’s residual income amounts to
a. P30,000
b. 7,500
c. 25,000
d. (7,500)

Items 34 and 35 are based on the following information

The Quezon City division of Luzonian Company is treated as an investment center for
performance measurement purposes. Selected financial information for such division for last
year is given below

Net sales 200,000

Cost of goods sold 176,250

General and admin. Expenses 3,750

Average working capital 31,250

Average plant and equipment 68,750

Desired rate of return 15%

 34. What was the Quezon City division’s return on investment for last year?
a. 29.09%
b. 15%
c. 53.33%
d. 20%
35. What was the Quezon City Division’s residual income for last year?
a. P5,000
b. P9,687.5
c. P8,750
d. P14,375
36. Residual income as used in evaluating the performance of investment centers is the
excess of the return on an investment over targeted amount equal to an imputed interest
charge on invested capital. The imputed interest rate used is ordinarily the
a. Target return on investment set by the company’s management, but is often equal to
the weighted average cost of capital
b. Average lending rate during the period under consideration
c. Average ROI for the investment center over the last several accounting periods.
d. Internal rate of return on the invested capital in the investment center.

Items 37 and 38 are based on the following information

Princess is the manager of the Home Care Product Division of Care Corporation. As a manager
of an investment center, Princess’ performance is measured using the residual income method

For the coming year, Princess wants to achieve a residual income target of P100,000 using an
imputed interest charge of 20%. Other forecasted figures for the coming year as follows

Working capital 90,000

Plant and equipment 860,000

Costs and expenses 1.210,000

37. How much should revenues be next year to achieve the residual income target?
a. P1.482,000
b. 1,300,000
c. 1,500,000
d. 1,464,000
38. By what percent should the division’s ROI next year exceed the desired rate of return?
a. 10.5%
b. 30.5%
c. 20%
d. 9.5%
39. Rizaldy Corp. is a decentralized firm segmented into different divisions and departments.
The divisions are treated as investment centers whose performance is evaluated using
the ROI method. Mr. L. Presidente, the president of Rizaldy Corp., requires a minimum
ROI of 10% for any project to be undertaken by the divisions in his company. He leaves
investment decisions to the managers as long as the 10% RO is expected to be realized.

Mr. D. Vision, a manager of one of the divisions of Rizaldy Corp. which has had a return
on investment of 15% for the past several years, expects to have the same ROI in the
coming year. MR. D. Vision has the opportunity to invest in a new project which is
expected to have ROI of 13%

Which of the ff. statements is incorrect?

a. If Mr. L. Presidente were to decide, he would invest in the new project regardless of
whether the division managers are evaluated based om ROI or residual income
b. If the division managers were evaluated based on the ROI method, MR. D. Vision
would not invest in the new project.
c. If the division managers were evaluated based on the residual income method, Mr.
D. Vision would invest in the new project
d. None of the above.
40. Man Edyer is the manager of the Manila Division of Perry Corporation. The Manila
Division is treated as an investment center whose performance is evaluated using the
residual income method
For the coming period, Man Edyer expects to incur total costs and expenses of
P1,210,000. The expected investment in the division for the same period is P950,000,
composed of working capital of P90,000 and plant and equipment of P860,000
To establish a standard of performance for the performance of Man Edyer in the coming
period, four scenarios are being considered
Desired rate of return Target residual income
Scenario 1 10% 125,000
2 12% 75,000
3 15% 100,000
4 18% 62,500

Which scenario assumes the highest revenue?

a. Scenario1
b. Scenario2
c. Scenario3
d. Scenario4

41. The ff. year-end data pertain to Adan Corporation

Earning before interest and taxes 800,000
Current Assets 800,000
Non-current Assets 3,200,000
Current Liabilities 400,000
 Non-current liabilities 1,000,000

Adan Corporation pays an income tax rate of 32%. Its weighted average cost of capital
is 10%. What is Adan Corporation’s Economic Value Added (EVA)?
a. 184,000
b. 144,000
c. 440,000
d. 400,000

42. The ff. year-end data pertain to Adan Corporation

Book Value Fair value
Current assets 800,000
Noncurrent Assets 3,200,000
Current liabilities 400,000
Non-current liabilities (8% interest rate) 1,000,000 1,000,000
Stockholders’ Equity 2,600,000 3,000,000

During the year, the company earned income before interest and taxes of P800,000. It
pays income tax at the rate of 25%. Its cost of equity capital is 12%

What is the company’s Economic Value Added?

a. 240,000
b. 222,000
c. 180,000
d. 422,000

43. Blescilyn Corp.’s net income for the year 200A was P126,000. Other pertinent data for
the corporation are as follows
Jan.1 Feb.1
Stockholder’s equity (80,000 shares outstanding) 840,000 896,000
Price per share 25 30

The company’s cost of equity capital is 10%. For purposes of measuring its
performance, Blescilyn Corp. computes its Economic Value Added. It also compute the
following
1. Equity Value Creation by multiplying the beginning equity capital by the difference
between the return on equity (Net income ÷ Beginning equity) and the percentage
cost of equity
2. Market Value Added which is the difference between the market value of equity
(outstanding shares x market price) and the equity supplied by stockholders
3. Total Shareholders’ Return which is equal to the change in stock price plus dividends
per share, dic=vided by the initial stock price.
 Considering the given data Blescilyn Corp.’s equity value creation, market value
added, and total shareholders’ return are

Equity Value Market Value Total Shareholder’s

Creation Added Equity
a. 42,000 344,000 28%
b. 126,000 400,000 24%
c. 89,000 80,000 20%
d. 84,000 56,000 8%

44. The price charged by one segment of an organization for a product or service supplied
to another segment of the same organization is called the
a. Selling price
b. Exchange rate
c. Transfer price
d. Outlay price

45. Transfer pricing works best in a decentralized organization. It should encourage goal
congruence and managerial effort. Goal congruence is
a. the extent of an attempt to accomplish a specific goal
b. The desire and the commitment to achieve a specific goal
c. The agreement on the goals of the organization and/or the segment by both the
superiors and subordinates
d. The extent to which managers have the authority to make decisions.

46. It is the extent to which a manager attempts to accomplish a specific goal. It may include
psychological, as well as physical commitment to a goal
a. Goal Congruence
b. Managerial Effort
c. Motivation
d. Autonomy

47. It is the desire to attain a specific goal and the commitment to accomplish the goal
a. Goal Congruence
b. Managerial Effort
c. Motivation
d. Autonomy

48. It is the extent which managers have the authority to make decisions
A. Goal Congruence
B. Managerial Effort
C. Motivation
D. Autonomy
49. An artificial profit center
a. Is not responsible for the costs that it occurs
b. Has no investment
c. Does not provide its goods or services outside the entity
d. Could not be operated as a cost center

50. Given no idle capacity and a competitive market exists, that is, all goods transferred
internally can be sold externally, the optimal method for establishing the transfer price is
the market price method, where the transfer price is equal to
a. Outlay cost plus opportunity cost
b. Outlay cost
c. Opportunity cost
d. Cost plus any markup

51. The optimal transfer price of a selling segment should be set at a point that will have the
most desirable economic effect on the company as a whole while at the same time
continuing to motivate the managers of every segment to perform efficiently. Setting the
transfer price based on actual costs rather than standard cost
a. Would give the selling segment little incentive to control costs
b. Lacks clarity and administrative convenience
c. Would charge inefficiencies to the selling segment
d. Would maximize profit of both the transferor and the transferee

52. The transfer price usually set by an absorption costing calculation is called the
a. Selling price
b. Market price
c. Full cost price
d. Retail price

53. Cabinet Inc. has two divisions: the Handles Division which manufactures cabinet
handles, and the Assembly Division which assembles various parts to produce cabinets,
the main product of Cabinet Inc.
The Handles division currently has excess capacity of 1,500 units. It produces handles
at variable cost of P70. The handle scan be sold in the outside market for P100.
The Assembly division requires 1,400 handles for the cabinets that it produces It can buy
such handles from outside suppliers at P100 or it can just buy them from the Handles
division.
What is the natural bargaining range for the two divisions regarding the transfer price of
the handles?
a. Between P70 and P100
b. Between P100 and P170
c. Any amount less than P100
d. P70 is the only acceptable price
54. The Northern Division sells goods internally to the Southern Division of the same
company. The prevailing external price of Northern Division’s product is P500 per unit
plus transportation. It costs P100 per unit to transport the goods to Southern.
Northern incurs the ff. costs per unit in pricing the goods.
Materials 250
Direct labor 75
Storage and handling 60
Total 385

If the market-based transfer pricing method is to be used, the transfer price must be set
at
a. P500
b. 600
c. 385
d. 325

55. Buyagan Corp. has two divisions, X and Y, both operated as profit centers. X charges a
transfer price of P140 per unit of the products transferred to Y. Other data about Division
X are as follows
Annual sales to outsiders 200,000 units
Annual sales to division 20,000 units
Variable cost per unit P120
Fixed Costs P40,000

Division X is planning to raise its transfer price to P200 per unit. Division Y can purchase
the units at P160 each from outside sources. However, should Y buy from outsiders, the
facilities used by division X to produce the units for Division Y would remain idle,
because Division X cannot increase sales to outsiders.

The company is a non-absolute decentralized organization. When sub-optimization is

likely to occur, the company president may intervene in the subordinate manager’s
decision

In this case from the perspective of the company as a whole and assuming that that
Division Y’s market is unaffected, from whom should it acquire the goods?
a. Division X, despite the increased transfer price
b. Outside vendor
c. Division X, but only at the variable cost per unit
d. Division X, but only until it reaches its break even point, then from outside vendors

56. Division Uno of Palacpac company is currently operation at full capacity of 5000 units. It
sells all its production in a perfectly competitive market for P250 per unit. Its variable
cost is P170 per unit, while total fixed cost amounts to P300,000
 The minimum transfer price that should be charged to Division Dos of Palacpac
Company for each unit of product transferred by Division Uno is
a. P230
b. 170
c. 250
d. 470

Items 57 and 58 are based on the following information

Division One of Lorivi Company is currently operating at 70% of capacity. It produces a single
product and sells all its production to outside customers for P70 per unit. Variable costs is P30
per unit and fixed costs is P20 per unit at the current production level.

Division Two which currently buys the same product from an outside supplier for P65 per unit,
would like to buy the product from Division One.

Division One will use one-half of its idle capacity if it decides to provide the requirements
Division Two.

57. What is the minimum price that Division One should charge Division Two for this
product?
a. P70
b. 30
c. 50
d. 65

58. What is the maximum price that division two will be willing to pay for the product if it will
be purchased internally?
a. P70
b. 30
c. 50
d. 65

Items 59 and 60 are based on the ff. information

Gripo Inc. has several divisions operating as decentralized profit centers. Gripo’s Shower
Faucet Division produces showerhead sets using subcomponents produced by two of Gripo’s
other divisions. The Flexi Hose Division manufactures a flexible hose, one type that is made
exclusively for the Shower Faucet Division, while other types are sold to outside markets.

The Valve Division, on the other hand, sells its valves in a competitive market, although one
type of valve is also used by the Shower Faucet Division. The Valve Division is currently
operating at 50% capacity level only.

The market prices, as well as the costs per unit of the flexible hose and the valves supplied by
the two other divisions to Shower Faucet Division as follows
 Flexible hose Valves

Market Price P125 220

Costs per unit: Materials 25 48

Labor 47 60

Variable Overhead 20 30

Fixed overhead 8 45

Total cost per unit P100 P185

59. Considering the given data, which of the following statements is incorrect?
a. If the Valves Division would transfer valves to Shower Faucet Division at a full cost
transfer price of P183, there would be no incentive on the part of the Valves division
to control or reduce production costs.
b. If the shower faucet division could buy valves in large volume at P200 per unit, the
Valve Division should reduce its transfer price to the same amount in order to
optimize the overall profit goal of Gripo inc.
c. If the Flexi Hose division has excess capacity and it has negotiated a transfer price
of P112 per unit with the Shower Faucet Division, this price will motivate both
divisions to buy and sell internally as profit shared.
d. None of the above.

60. The managers of the Shower Faucet Division and the Flexi Hose Division want to set a
transfer price that will divide the resulting profit/savings equally between their divisions,
Such transfer price should amount to
a. P108.25
b. 125
c. 100
d. 92

61. Feedback regarding managerial performance may take the form of financial and non-
financial measures that may be generated internally or externally, Examples of external
non-financial measures are the ff. except
a. Market share
b. Product quality
c. Delivery performance
d. Customer Satisfaction

62. Feedback regarding managerial performance may take the form of financial and and
non-financial measures that may be generated internally or externally, Examples of
internal non-financial measures are the ff. except
 a. Manufacturing cycle time
b. Product quality
c. New product development time
d. Customer Satisfaction

63. It is the quotient if the time required for value added production divided by the total
manufacturing cycle time.
a. Break-even sales ratio
b. Manufacturing cycle efficiency
c. Delivery cycle time
d. Productivity ratio

Items 64 to 68 are based on the ff. information:

Santino company’s vice president for finance has decided to use delivery performance
measures to evaluate performance. He requested the production manager to submit data that
will be used for the evaluation.

The production manager submitted the following, which, accordingly is typical of the time
involved to complete orders

Waiting time from orders being placed

to start of production 6 days

Waiting time from start of production

to completion 2 days

Process time 1 week

Move time 4 days

Inspection time 1 day

The company operates seven days a week

64. What is the delivery cycle time?

a. 20 days
b. 14 days
c. 8 days
d. 6 days

65. The total manufacturing cycle (or throughput) time is

a. 7 days
b. 8 days
c. 14 days
d. 20 days
 66. The value added production time is
a. 1 day
b. 7 days
c. 14 days
d. 20 days

67. What is the manufacturing cycle efficiency?

a. 12.5%
b. 35%
c. 50%
d. 5%

68. What is the delivery cycle efficiency ?

a. 35%
b. 50%
c. 12.5%
d. 5%

69. Which of the following statements is false?

a. Qualitative non financial performance measures often reflect long-term
organizational goals better than financial performance measures
b. Relative to qualitative performance measures, quantitative performance measures
are less subjective.
c. Improved effectiveness and efficiency of a product is considered a quantitative
performance measurement
d. In selecting non-financial measures, managers should choose measures that reflect
both short term and long term measures related to critical success factors.

70. The number of units of output that can be produced in a given period of time is called
a. Velocity
b. Cycle time
c. Economic value added
d. Manufacturing cycle efficiency

Items 71 to 74 are based on the following information

Kotse-kotsehan company produces toy cars. It divided its production line into different
manufacturing cells. One cell in the assembly department installs the motor in the toy cars. The
maximum capacity of the cell is 5,000 units per month. There are 2.500 production hours
available per month.

71. The theoretical cycle time (minutes per unit) is

a. 0.50
b. 30
 c. 2.00
d. 0.03

72. The theoretical velocity (units per hour) is

a. 0.50
b. 30
c. 2.00
d. 0.03

73. If the cell uses 2 minutes of move time, 5 minutes of wait time, and 3 minutes of
inspection time, what is the manufacturing cycle efficiency?
a. 3
b. 33 1/3%
c. 1.33
d. 75%

74. Using the information in #73, the actual velocity is

a. 1.50
b. 1.33
c. 25%
d. 3

75. It is the relationship between outputs and inputs

a. Cycle time
b. Gross profit ratio
c. Productivity
d. Inventory turnover

Items 76 to 77 are based on the ff. information

In its desire to improve input usage efficiency, the management of Productive Enterprises
implemented some changes in its production process at the beginning of 200B. At the end of
that year, management wants to assess the effect of the changes implemented.

The company’s accountant provided the following data may be used for the evaluation of the
new process.

200A 200B

Production (units) 20,000 25,000

Selling Price P80 P80

Relevant inputs: Materials (units) 16,000 19,231

Materials cost per unit P10 P11

 Labor hours 20,000 20,833

Labor rate per hour P50 P52

76. The productivity ratios for 200A are:

Materials Labor
a. 1.25 1.00
b. 1.30 1.20
c. 0.80 1.00
d. 0.77 0.83

77. How much is the change in profit due to change in productivity (productivity-linked
improvement)?
a. 265,143
b. 40,000
c. 73,960
d. 225,143

78. Which of the following statements about a balanced scorecard is incorrect?

a. A primary purpose of a balanced scorecard is to give managers a way to forecast
future performance
b. In a balanced scorecard, measurements should be directly linked to organizational
strategy and values
c. A balanced scorecard can be used at multiple organizational levels by redefining the
categories and measurements.
d. Using the balanced scorecard approach, an organization evaluates managerial
performance based on a single ultimate measure of operating results, such as
residual income.

79. The balanced scorecard translates an organization’s mission and strategy into
operational objectives and performance measures for four different perspectives. Which
of the following is not among those perspectives?
a. Financial perspective
b. Customer perspective
c. Environmental perspective
d. Learning and growth perspective

80. Customer measures on the balanced scorecard should be

a. internal and external
b. monetary and non-monetary
c. internal and monetary
d. internal, external, monetary and non-monetary
81. On a balanced scorecard, which of the following would be most appropriate to measure
customer service?
a. Corporate financial profits
b. On time delivery
c. On time production
d. Decrease in re-work cost of defective units

82. On a balanced scorecard, which of the following is not an appropriate measure of

internal business process performance?
a. Delivery cycle time
b. Number of customer complaints
c. Quality costs
d. Manufacturing cycle efficiency

83. On a balanced scorecard, which of the following would be most appropriate to measure
financial performance?
a. Return on investment
b. Ratings from customer service
c. Number of new customers
d. Percentage of repeating customers

84. It is the difference between realization and sacrifice, where realization is what the
customer receives and sacrifice is what is given up in return
a. Revenue growth
b. Strategy
c. Customer profitability
d. Customer value

85. A primary characteristic of a performance management system is

a. Efficiency of application to all the employees of the firm
b. Consistency at all levels in the organization
c. Adaptability to differing situations in the organization
d. Flexibility to delay rewards even if performance objectives have already been met.

86. Claveria Company’s current production process produces 10,000 units of output with
2,500 labor hours per day. Thus, productivity is 4, considering that the productivity is
defined as the ratio of outputs to the inputs used.
Accordingly, the present production process can be redesigned to produce 12,600 units
of output requiring 3,000 labor hours per day.

Redesigning the process would

a. Cause no change in productivity
b. Decrease productivity by 5%
c. Increase productivity by 5%
 d. Increase productivity by 0.20

Items 87 and 88 are based on the following information

Total factor productivity is computed by dividing the units of output by the cost of all inputs. It
varies with input prices, quantities, input mix and output levels. It is computed for purposes of
control and performance evaluation.

Assume that Rosales Company produced 1,152 units of its product Y last month. The inputs to
the production process of Product Y were:

Material A 360 kg @ P1.20 per kg P432

Material B 240 units @P2.20 per kg 528

Direct Labor 240 hours@ P12 per hour 2,880

Total cost of inputs P3,840

87. The total factor productivity for Rosales Company’s product Y is

a. 3.20 per kilo
b. 4.80 per unit
c. 4.80 per hour
d. 0.30 per peso input

88. If a supervisor’s primary responsibility in thr production of Product Y is employee

supervision, and his/her productivity is measured based on output per labor hour, such
supervisor’s productivity measure is
a. 3.20 per kilo
b. 4.80 per unit
c. 4.80 per hour
d. 0.30 per peso input