MAS - Responsibility Accounting
MAS - Responsibility Accounting
MAS - Responsibility Accounting
RESPONSIBILITY ACCOUNTING
2nd Semester, 2019-2020
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 c. Standard cost accounting
b. 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
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
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
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 is 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
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
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.
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 is 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
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.
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
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
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%
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 computes 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
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
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, 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
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
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
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
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%
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
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
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
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.
88. If a supervisor’s primary responsibility in the 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