DO NOT JUST GIVE ANSWER.

MANAGERIAL ACCOUNTING

TOPIC: RESPONSIBILITY ACCOUNTING

21. The segment margin of an investment center after deducting the imputed interest on the assets used by the investment

center is known as

a. Return on investment c. Operating income

b. Residual income d. Return on assets

22. If a division's ROI and the minimum required ROI are the same, what is the division's residual income?

a. Positive c. Negative

b. Zero d. None of the above

Items 23 and 24 are based on the following information

Jade Co.'s industrial photo finishing division VVV incurred the following costs and expenses in 2021:

Variable Fixed

Direct materials P 200,000

Direct labor 150,000

Factory overhead 70,000 P 42,000

General, selling and administrative 30,000 48,000

TOTAL P 450,000 P 90,000

During 2021, VVV produced 300,000 units of industrial photo-prints, which were sold for P 2.00 each. Jade's investment

in VVV was P 500,000 and P 700,000 at January 1, 2021 and December 31, 2021, respectively. Jade normally imputes

interest on investment at 15% of average invested capital.

23. For the year ended December 31, 2021, what was VVV's return on investment?

a. 15.0% c. 8.6%

b. 10.0% d. (5.0%)

24. Assume that the net operating income was P 60,000 and that average invested capital was P 600,000. For the year

ended December 31, 2021, what was VVV's residual income (loss)?

a. P 150,000 c. (P 45,000)

b. P 60,000 d. (P 30,000)

25. Frank Co. is a computer service center. For the month of May, Frank had the following operating statistics:

Sales P 450,000 Total assets P 500,000

Operating income P 25,000 Shareholder's equity P 200,000

Net profit after taxes P 8,000 Cost of capital 6%

Based on the above information, which one of the following statements is correct?

a. Return on investment of 4% c. Return on investment of 1.6%

b. Residual income of (P 5,000) d. Residual income of (P 22,000)

26. Managerial performance can be measured in many different ways, including return on investment (ROI) and residual

income. A good reason for using residual income instead of ROI is that

a. Residual income can be computed without regard to identifying an investment base.

b. Goal congruence is more likely to be promoted by using residual income.

c. Residual income is well understood and often used in the financial press.

d. ROI does not take into consideration both investment turnover ratio and return-on-sales percentage.

27. Residual income (RI) is a performance evaluation that is used in conjunction with, or instead of, return on investment

(ROI). In many cases, RI is preferred to ROI because

a. RI is a measure over time, while ROI represents the results for one period

b. RI concentrates on maximizing absolute amount of income rather than a percentage return like ROI

c. The imputed interest rate used in calculating RI is more easily derived than the target rate that is

compared to the calculated ROI

d. Average investment is employed with RI while year-end investment is employed with ROI