DISCUSSION

PROBLEMS
RESPONSIBILITY ACCOUNTING
PROBLEM 1

Marsh Company that had current operating assets of

one million and net income of P200,000 had an
opportunity to invest in a project that requires an
additional investment of P250,000 and increased net
income by P40,000. After the investment, the
company's ROI will be
PROBLEM 2

The following data relate to the Motor Division of Eurosun

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:
PROBLEM 3

The current income for a subunit is P36,000. Its current

invested capital is P200,000. The subunit is considering
purchasing for P20,000 equipment that will increase
annual income by an estimated P2,800. The firm's cost of
capital is 12%. If the equipment is purchased, the residual
income of the subunit will
PROBLEM 4

Consider the following:

Investment center’s after-tax operating profit P 50,000
Investment center’s total assets 800,000
Investment center’s current liabilities 80,000
Weighted-average cost of capital 6.5%
What is the economic value added (EVA)?
PROBLEM 5

Carlyle Company had the following information pertaining to 2005:

Profit P100,000
Sales P1,000,000
Asset Turnover ratio 2 times
The desired minimum rate of return is 15 percent.

What is the ROI?

What is the return on sales?
What is the amount of assets?
What is Caryle’s residual income?