36) If Division X is NOT at full capacity, the lowest price at which it  would be willing to sell to Division Y would be

A) $50.

B) $34.

C) $16.

D) $44.

37) The formal and informal performance-based rewards that enhance managerial effort toward organizational goals are referred to as

A) feedback.

B) evaluations.

C) incentives.

D) risks.

The Pen and Pencil Divisions are part of the same company.  Currently the Pencil Division buys a part ingredient from Pen for $96.  The Pen Division wants to increase the price of the part it sells to Pencil by $24 to $120.  The manager of Pencil has stated that it cannot afford to go that high, as it will decrease the division’s profit to near zero.  Pencil can buy the part from an outside supplier for $112.  The cost data for the Pen Division is as follows:

Direct materials

$34.00

Direct labour

50.00

Variable overhead

10.00

Fixed overhead

9.60

If Pen ceases to produce the parts for Pencil, it will be able to avoid one-third of the fixed manufacturing overhead.  The Pen Division has excess capacity but no alternative uses for its facilities.

38) From the standpoint of the company as a whole, should Pencil continue to buy from Pen or start to buy from the outside supplier?

A) Buy from Pen Division, because the company’s profit would be $14.80 per unit larger.

B) Buy from Pen Division, because the company’s profit would be $8.00 per unit larger.

C) Buy from an outside supplier.

D) None of the above.

39) What is the maximum transfer price that should be charged?

A) $120.00

B) $112.00

C) $97.20

D) $103.60

40) What is the minimum transfer price that should be charged?

A) $120.00

B) $112.00

C) $97.20

D) $94.00

The Ink and Paper Divisions are part of the same company.  Currently the Paper Division buys a part ingredient from Ink for $192.  The Ink Division wants to increase the price of the part it sells to Paper by $48 to $240.  The manager of Paper has stated that it cannot afford to go that high, as it will decrease the division’s profit to near zero.  Paper can buy the part from an outside supplier for $224.  The cost data for the Ink Division is as follows:

Direct materials

$68.00

Direct labour

100.00

Variable overhead

20.00

Fixed overhead

19.20

If Ink ceases to produce the parts for Paper, it will be able to avoid one-third of the fixed manufacturing overhead.  The Ink Division has excess capacity but no alternative uses for its facilities. 

41) From the standpoint of the company as a whole, should Paper continue to buy from Ink or start to buy from the outside supplier?

A) Buy from Ink Division, because the company’s profit would be $29.60 per unit larger.

B) Buy from Ink Division, because the company’s profit would be $16.00 per unit larger.

C) Buy from an outside supplier.

D) None of the above.

42) What is the maximum transfer price that should be charged?

A) $240.00

B) $224.00

C) $194.40

D) $207.20

43) What is the minimum transfer price that should be charged?

A) $240.00

B) $224.00

C) $194.40

D) $188.00

44) According to agency theory, employment contracts will trade off the following three factors:

A) incentive, risk and cost of measuring performance.

B) cost-benefit, risk and uncontrollable factors.

C) goal congruence, incentive and risk.

D) cost of measuring performance, cost-benefit and risk.

The following information is available for the Berger Company:

Sales

$4,000,000

Invested capital

1,250,000

ROI

10 percent

45) What is the capital turnover?

A) 3.2000

B) 0.1000

C) 0.3125

D



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