1.In a make or buy type of analysis all of the following considerations are accounted for except:

a. the evaluation of an external supplier.

b. comparison of avoidable cost among the alternative options.

c. consideration of opportunity costs.

d. comparison of relevant internal costs with the cost to purchase externally.

e. comparison of incremental revenue with incremental costs.

2.Division Z of a company produces a component that it currently sells to outside customers for P20 per unit. At its current level of production, which is 60% of capacity, Division Z's fixed cost of producing this component is P5 per unit and its variable cost is P12 per unit. Division Y of the same company would like to purchase this component from Division Z for P10. Division Z has enough excess capacity to fill Division Y's requirements. The managers of both divisions are compensated based upon reported profits. Which of the following transfer prices will maximize total company profits and bemost equitableto the managers of Division Y and Division Z?

a. P21 per unit.

b. P17 per unit.

c. P22 per unit.

d. P15 per unit

e. P11 per unit.

f. two answers

3.Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 13% for any project to be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 13% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics that is expected to have a return on investment of 12%. If the Deed Corporation evaluates managerial performance usingresidual incomebased on thecorporate minimum required rate of return, what will be the preference for taking on the proposed cosmetics line by Edith Carolina and Michael Sanders?

a. Reject, Accept respectively

b. Reject, Reject respectively

c. Accept, Accept respectively

d. Accept, Reject respectively

4.Laptop Co. presently has a current ratio of 0.9 and an acid-test ratio of 0.8. Prepaying next year's office rent of P50,000 will:

a. have no effect on either the company's current ratio or its quick ratio.

b. decrease the company's current ratio and decrease its quick ratio.

c. increase the company's current ratio and increase its quick ratio.

d. have no effect on the company's current ratio but will decrease its quick ratio.

e. have no effect on the company's current ratio but will increase its quick ratio.

5.The following year-end data pertains to OLI CORP, a subsidiary of GUMP Holdings:

Earnings before interest and taxes

800,000

Current assets

800,000

Non-current assets

3,200,000

Current liabilities

400,000

Non-current liabilities

1,000,000

OLI CORP pays an income tax rate of 30%. Its weighted average cost of capital is 9%, though top management of GUMP Holdings only accept projects that at least meet a rate of return of 10%. What is OLI CORP's economic value added?

a. P476,000

b. P326,000

c. P200,000

d. P440,000

e. P236,000