Question
1-5 The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: Restin, Inc Los Angeles Bay Area
1-5 The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions:
| Restin, Inc | Los Angeles | Bay Area | Central Valley |
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| Division | Division | Division |
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Revenues | P750,000 | P200,000 | P235,000 | P325,000 |
Variable operating expenses | 410,000 | 110,000 | 120,000 | 180,000 |
Controllable fixed expenses | 210,000 | 65,000 | 75,000 | 70,000 |
Noncontrollable fixed expenses | 60,000 | 15,000 | 20,000 | 25,000 |
In addition, the company incurred common fixed costs of P18,000
1. Bay Area's segment profit margin is:
A. P14,000. B. P18,000. C. P20,000. D. P40,000.
2. The profit margin controllable by the Central Valley segment manager is:
A. P32,000. B. P44,000. C. P50,000. D. P75,000.
3. Assuming use of a responsibility accounting system, which of the following amounts should be used to evaluate the performance of the Los Angeles division manager?
A. P 4,000. B. P 8,000. C. P 10,000. D. P 25,000.
4. Which of the following amounts should be used to evaluate whether Restin, Inc., should continue to invest company resources in the Los Angeles division?
A. P 4,000. B. P 8,000. C. P 10,000. D. P 25,000.
5. Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by P10,000. As a result, revenues increase by P50,000. If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is:
A. P12,500. B. P22,500. C. P32,500. D. P50,000.
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