Strategic Cost Management

1. Universal Rabina Corporation's Gauge Division manufactures and sells product no. 24, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P200 and P50, respectively. The Division can sell this item to external domestic customers for P360 or, alternatively, transfer the product to the company's Refrigeration Division. Refrigeration is currently purchasing a similar unit from Taiwan Company for P330. Assume use of the general transfer-pricing rule. If Gauge Division had no excess capacity, what transfer price would the Division's management set?

P250

P320

P330

P360

None of the above

2. If ABC Company has a 9% ROS, income of P2,160, and an investment turnover of 2.4 times, divisional investment is

P10,000

P12,500

P20,000

P50,000

None of the above

3. Salonga Company has two divisions: the Cologne Division and the Bottle Division. The Bottle Division produces containers that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost is P20, shipping cost is P1, and the external sales price is P30. No shipping costs are incurred on sales to the Cologne Division, and the Cologne Division can purchase similar containers in the external market for P26. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Cologne Division. The transfer price from the Bottle Division to the Cologne Division would be:

P20

P21

P26

P29

P30