MULTIPLE CHOICE ANSWERS:

1. A 14. A 27. A
2. B 15. C 28. C
3. C 16. C 29. D
4. C 17. A 30. D
5. D 18. C 31. A
6. B 19. B 32. A
7. A 20. A 33. C
8. C 21. C 34. A
9. B 22. D 35. B
10. A 23. C 36. B
11. B 24. C 37. D
12. D 25. C
13. C 26. D

PROBLEMS:

1. ROI
a. Gross Margin P550, 000

S&A Expenses 300, 000

NOI P250, 000

b.AOA=(BOA+EOA)/2

=(P1, 400, 000+P1, 100, 000)

=P1, 250, 000

c. ROI=P250, 000/P1, 250, 000

=20%

2. Economic Value Added

a. Sales P5, 000,000

COGS 3, 500 000

Gross Margin P1, 500, 000

 S&A Expenses (500, 000)

Operating income P1, 000, 000

Income Tax(40%) 400, 000

NET INCOME P600, 000

b. EVS =after tax OI-(Actual % lost of capital x Total capital employed)

=P600, 000-(P6, 000, 000 x 0.08)

=P600, 000-P480, 000

=P120, 000

3. Transfer Pricing

a. total variable cost per unit= P10+2+3=P15

Minimum transfer price=P15

b. Maximum transfer price=P28

c. Yes, An internal transfer should take place since 18 pesos per unit is in
the range between 15-28 pesos per unit which is the minimum and maximum
transfer price.

No, I would not sell the 50, 000 components for P18 each. If I would sell
the components to division Y, I could only earned less than what I would earn if I
sell it to external users for P29.

d. Sales P1, 050, 000

COGS (250, 000)

Gross Margin P800, 000

Fixed expenses (500, 000)

Variable expenses (50, 000)

NOI P250, 000

ROI =P250, 000/P10, 000, 000

=2.5