1.

AquaShine Inc. has a number of divisions, including the Beige Division, a producer of fabric, and the Purple Division, a fabric painting division. The cost per yard of the cloth manufactured by Beige Division of the AquaShine Inc. is as follows:

Direct material	$18
Direct labor	$7
Variable overhead	$2
Fixed overhead	$3

Calculate the transfer price if the company allows transfer pricing at cost plus 10%.

a.$30

b.$27

c.$35

d.$33

2.

Which of the following is true of a double-loop feedback?

a.It occurs when managers receive information about both the effectiveness of strategy and validity of assumptions underlying the strategy.

b.It emphasizes only the effectiveness of implementation of a strategy.

c.It is typically provided only in a functional-based responsibility accounting system.

d.It questions only the validity of assumptions underlying a strategy.

3.

Which of the following statements is true of turnover?

a.It is the ratio of sales to average operating assets.

b.It is the portion of sales that is available for interest, taxes, and profit.

c.It is also referred to as return on sales.

d.It is the ratio of operating income to sales.

4.

Following is the financial information of Azure Company for the last financial year:

Operating Income	$84,000
Less: income taxes @35%	$29,400
Net Income	$54,600
Total capital employed	$400,000
Actual cost of capital	10%
Minimum expected rate of return	11%

Calculate economic value added (EVA) of Azure.

a.$16,100

b.$18,600

c.$14,600

d.$17,100

5.

Following is the financial information of Optimum Solvers Inc. for the last financial year:

Operating Income	87,600
Sales	$1,460,000
Average Operating Assets	$730,000

Calculate its margin ratio and turnover ratio.

a.Margin ratio is 7%; turnover ratio is 3

b.Margin ratio is 6%; turnover ratio is 3

c.Margin ratio is 6%; turnover ratio is 2

d.Margin ratio is 7%; turnover ratio is 2

6.

Which of the following should be focused on by the central management in a decentralized company?

a.The laying off of high-level managers

b.Day-to-day operations of the organization

c.Masking inefficiencies with the help of overall profit margin

d.The long-run survival of the organization