Question 1 (1 point)

Production budget is the first budget being prepared among the operational budgets.

Question 1 options:

	True
	False

Question 2 (1 point)

If a firm operates at capacity, the minimum transfer price should be the differential cost.

Question 2 options:

	True
	False

Question 3 (1 point)

A transfer price is the price charged by one segment of the company for goods or services provided to another segment.

Question 3 options:

	True
	False

Question 4 (1 point)

A budget ignores past performance because it represents management's plans for a future time period.

Question 4 options:

	True
	False

Question 5 (1 point)

The formula for the production budget is budgeted sales in units plus desired beginning inventory minus ending inventory.

Question 5 options:

	True
	False

Question 6 (1 point)

The formula for computing the direct labor budget is to multiply the direct labor cost per hour by the total required direct labor hours.

Question 6 options:

	True
	False

Question 7 (1 point)

The budgeted income statement is the end-product of the financial budgets.

Question 7 options:

	True
	False

Question 8 (1 point)

A sunk cost is a potential benefit that will be lost when one course of action is chosen over its alternative.

Question 8 options:

	True
	False

Question 9 (1 point)

Incremental analysis is the process of identifying the financial data that change under alternative courses of action.

Question 9 options:

	True
	False

Question 10 (1 point)

In making business decisions, management ordinarily considers financial information only.

Question 10 options:

	True
	False

Question 11 (1 point)

In a make or buy decision, relevant costs do not include the opportunity costs.

Question 11 options:

	True
	False

Question 12 (1 point)

If an unprofitable segment is eliminated, net income will always increase.

Question 12 options:

	True
	False

Question 13 (1 point)

Full-cost pricing is a pricing approach that defines the cost base as all costs incurred.

Question 13 options:

	True
	False

Question 14 (1 point)

Mark-up is the amount added to a product's cost base to determine the product's selling price.

Question 14 options:

	True
	False

Question 16 (5 points)

1. The High Division of Para Company produces a high quality kite. Unit production costs (based on capacity production of 100,000 units per year) follow:

Direct materials P 60

Direct labor 25

Overhead (20% variable) 15

Other information

Sales price 120

Selling expenses (15% variable) 20

The High Division is producing and selling at capacity.

What is the minimum selling price that the division would consider as a "transfer price" to the Recreation Division on which no variable period costs would be incurred?

Question 16 options:

	P117
	P88
	P91
	P120

Question 17 (5 points)

1. Division A produces a part with the following characteristics:

Capacity in units 50,000

Selling price per unit P30

Variable costs per unit P18

Fixed costs per unit P3

Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at P28 per unit. If Division A sells to Division B, P1 in variable costs can be avoided.

Suppose Division A is currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price. From the point of view of Division A, any sales to Division B should be priced no lower than:

Question 17 options:

	P26
	P27
	P28
	P29

Question 18 (5 points)

It costs a company P14 of variable costs and P6 of fixed costs to produce product ABC100 that sells P30. A foreign buyer offers to purchase 3,000 units at P18 each. If the special offer is accepted and produced with unused capacity, net income will

Question 18 options:

	increase P12,000
	decrease P6,000
	increase P6,000
	increase P9,000

Question 19 (5 points)

A segment of Bookmarks Inc has the following data.

Sales P200,000

Variable expenses P140,000

Fixed expenses P100,000

If this segment is eliminated, what will be the effect on the remaining company? Assume that 50% of the fixed expenses will be eliminated and the rest will be allocated to the segments of the remaining company.

Question 19 options:

	P10,000 decrease
	P10,000 increase
	P50,000 increase
	P120,000 increase

Question 20 (5 points)

Saved

Direct materials inventories are kept in pounds in Tumi Company, and the total pounds of direct materials needed for production is 9,500. If the beginning inventory is 1,000 pounds and the desired ending inventory is 2,200 pounds, the total pounds to be purchased is:

Question 20 options:

	10,700
	9,700
	9,500
	9,400