I. Aqua Division is one of the operating units of World Treasure Hunters Inc. some of the division's operating results follow:

Sales

P3,000,000

Profit Margin

10%

Target Return

15%

Residual Income

P60,000

Requirement:

1. What was the segment income of the division for 2007?

2. What was the return on investment in this division for 2007?

II. Paints Division of Fil-Chemical Company produced the following operating results in 2007:

Sales

P10,000,000

Segment Income

1,500,000

Assets

6,000,000

The division is considering a P1,000,000 investment in a new project. Paints Division estimates that its return on

investment (fro all of its operations) would be at 22 percent with the new investment.

Requirement:

1. How much net segment income is the new project expected to produce?

2. If the manager of the division is evaluated on return on investment alone, will she invest in the new project? Explain.

III. The manager of the Marine Division of Sea Tours, Inc. is preparing the budget for 2008. At this point, she had determined

that average total assets for 2008 will equal P4,000,000. The manager is evaluated on the amount of residual income

generated by the division. Assume variable costs in Dallas Division are expected to equal 60% of total sales and fixed

costs are expected to equal P400,000 in 2008.

Requirement:

1. Compute the sales level that would generate a 20% return on investment.

2. Assuming the rate of return in investment is 15%, determine the level of sales that would generate P200,000 of

residual income.

IV. The following information is given for Blue and Red Divisions of Color Company.

Requirement:

1. If the company uses income to evaluate division managers, compute net income that would be used for that purpose

given the above limited data.

2. If the company uses ROI to evaluate division managers and uses historical cost as the investment base, compute the

ROI for the 2 divisions.

V. A Company's manufacturing costs for July when production was 500 units appears below:

Direct materials

P20 per unit

Factory depreciation

P8,000

Variable overhead

4,000

Direct labor

1,500

Factory supervisory salaries

5,800

Other fixed factory costs

1,500

Requirement: Prepare for the flexible budget for the period.

VI. Sahlee's Sofa Store produces sofas. The following budgeted and actual amounts are for 2007:

Requirement: performance report for the company for the year just ended