MAS-WEEK 6-BALANCED SCORECARD AND RESPONSIBILITY

Question 1
 Consider the following three statements:
I. A profit center has control over both cost and revenue.
II. An investment center has control over invested funds, but not over costs and revenue.
III. A cost center has no control over sales
Which statement(s) is/are correct?
Response: Only I and III
Correct answer: Only I and III
Score: 1 out of 1 Yes

Question 2
Assume the following information for a product line:

Sales P500,000

Variable manufacturing expenses 100,000

Direct fixed manufacturing expenses 75,000

Variable selling and administrative expenses 50,000

Direct fixed selling and admin. expenses 60,000

What is the segment margin of the product line?

Response: P215,000
Correct answer: P215,000
Score: 1 out of 1 Yes

Question 3
 Which of the following perspectives of the balanced scorecard deal with objectives of increasing
market share and penetrating new markets?
Response: Customer
Correct answer: Customer
Score: 1 out of 1 Yes

Question 4
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:

Response: 15 percent
Correct answer: 25 percent
Score: 0 out of 1 No

Question 5
 Employee skill sets and the concept of balanced scorecard have received considerable
managerial attention in recent years. Under the balanced scorecard methodology, employee skill
sets are most likely to be addressed and measured under which category?
Response: Financial
Correct answer: Learning and growth
Score: 0 out of 1 No

Question 6
Compute the June cost of capital (rounded to nearest percent) for an investment center with the
following information:

Pre-tax operating income for June P17,500,000 

Assets at June 30 6,200,000 

Current liabilities at June 30 4,000,000 

Long-term liabilities at June 30 1,500,000 

Income tax for June 30 5,000,000 

EVA 12,040,000
Response: 14 percent
Correct answer: 21 percent
Score: 0 out of 1 No

Question 7
Adly Corp. wishes to earn a 30% return on its P100,000 investment in equipment used to produce
product X. Based on estimated sales of 10,000 units of product X next year, the costs per unit would
be as follows:

Variable manufacturing costs                     P5

Fixed selling and administrative costs             2

Fixed manufacturing costs                              1

At how much per unit should product X be priced for sale?

Response: P10
Correct answer: P11
Score: 0 out of 1 No

Question 8
 The application of the balanced scorecard includes four categories of measures. Production
downtime would fall into one of those four categories. The specific category would be:
Response: internal business process
Correct answer: internal business process
Score: 1 out of 1 Yes

Question 9
 Largo Company recorded for the past year sales of P750,000 and average operating assets of
P375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of
15%?
Response: 7.50%
Correct answer: 7.50%
Score: 1 out of 1 Yes

Question 10
Apple Division of the American Fruit Co. had the following statistics:

Assets available for use P1,000,000

Residual income 100,000

 Return on investment 15%

If the manager of Apple Division is evaluated based on return on investment, how much would she be
willing to pay for an investment that promises to increase net segment income by P50,000?

Response: P333,333
Correct answer: P333,333
Score: 1 out of 1 Yes

Question 11
 If the investment turnover increased by 20% and ROS decreased by 30%, the ROI would
Response: Increase by 20%
Correct answer: Decrease by 16%
Score: 0 out of 1 No

Question 12
James Webb is the general manager of the Industrial Park Division, and his performance is measured
using the residual income method. Webb is reviewing the following forecasted information for the
division for next year.

Category Amount (thousands)

Working capital P   1,800

Revenue     30,000

Plant and equipment     17,200

If the imputed interest charge is 15% and Webb wants to achieve a residual income target
of P2,000,000, what will costs have to be in order to achieve the target?

Response: P9,000,000
Correct answer: P25,150,000
Score: 0 out of 1 No

Question 13
 On a balanced scorecard, which of the following is not a customer measure?
Response: Warranty expense
Correct answer: Economic value added
Score: 0 out of 1 No
Question 14
 The Valve Division of Fidelity Company produces a small valve that is used by various
companies as a component part in their products. Fidelity Company operates its divisions as
autonomous units, giving its divisional manager great discretion in pricing and other decisions.
Each division is expected to generate a rate of return of at least 14% on its operating assets. The
Valve Division has average operating assets of P700,000. The valves are sold for P5. Variable
costs are P3 per valve, and fixed costs total P462,000 per year. The Division has a capacity of
300,000 units. How many valves must the Valve Division sell each year to generate the desired
rate of return on its assets?
Response: 350,000
Correct answer: 280,000
Score: 0 out of 1 No

Question 15
 If PFRS income of Genesis Company, adjusted for economic value added, is 15% of sales,
capital employed is P5,000,000, the cost of capital is 8%, and sales is P12,000,000, then
economic value added is:
Response: P3,200,000
Correct answer: P1,400,000
Score: 0 out of 1