1. Assignment 2 for MA2 For 2013 intake Canada CPA

2. 1. Which of the following is the formula for calculating minimum transfer price? a. Contribution margin + lost revenue on outside sales b. Full cost + lost contribution margin per unit c. Variable cost + lost contribution margin per unit on an outside sale d. Variable cost + lost revenue per unit

3. 2. Which of the following is not a suitable method for determining transfer price? a. Cost-based b. Market-based c. Negotiated d. Normal costing

4. 3. Which of the following attributes does not lend itself to a decentralized organization? a. It is a small organization. b. It is a fast-growing organization. c. It is in a high-tech industry such as computers. d. Management has confidence in subordinates.

5. a. Minimum $38.50; maximum $62.00 b. Minimum $38.50; maximum $65.00 c. Minimum $39.50; maximum $62.00 d. Minimum $39.50; maximum $65.00

6. 5. The Monitor division of Raytech Inc. purchases screens from the Screen division. The following data is available on the cost of screens to the Monitor division from the Screen division Prime cost $32.00 Variable manufacturing overhead per unit 6.50 Fixed manufacturing overhead per unit4.00 Transportation cost1.00 Screen division has a capacity of 100,000 and is currently selling 60,000 units to outside suppliers for $65.00 per unit and sales representatives are paid $2.00 commission per unit. Sales commissions would not be paid on any transfers to the Monitor division. Demand for the current year from the Monitor division is 50,000 units. What is the minimum transfer price that the Screen division should charge the Monitor division to be equally well off? a. $43.20 b. $44.20 c. $44.60 d. $63.00

7. 6. Which transfer pricing method best achieves the overall objectives of goal congruence and optimizing sub-unit performance and autonomy in a perfectly competitive market? a. Market-based transfer pricing b. Cost-based transfer pricing c. Dual pricing transfer pricing d. Negotiated transfer pricing

8. a. $26.00 b. $28.00 c. $31.40 d. $33.80

9. 8. The disadvantages of decentralization include all of the following, EXCEPT a. management development and learning. b. duplication of activities. c. increased costs of information-gathering. d. decreased loyalty toward the organization as a whole.

10. 9. All of the following are benefits of decentralization EXCEPT a. it creates greater responsiveness to local needs. b. it decreases management and worker motivation. c. it leads to quicker decision making. d. it sharpens the focus of managers.

11. 10. Sub-units X and Y determined the price for interdepartmental services during the last monthly meeting, using the selling prices charged to outside parties. This is an example of a. Sub-unit transfer prices. b. negotiated transfer prices. c. market-based transfer prices. d. cost-based transfer prices.

12. CDACB ACABB

13. Johnson Manufacturing Inc. manufactures two products, A and B, and is comparing the budget for the current year with the actual results. The firm budgeted for sales of product A at 450,000 units, representing a market share of 9%, and sales for product B at 300,000, representing a 12% market share. The selling price was budgeted at $8 per unit for product A and $14.00 per unit for product B, with variable costs of $5 for A and $7 for B. Fixed costs of $420,000 were incurred. Actual sales for the year for product A were 522,750 units as compared to the total industry sales of 5,100,000 units. Actual sales for product B were 327,250 units as compared to the total industry sales of 2,337,500 units. Actual selling price for product A per unit was $8.20 and the variable costs were $4.90. The actual selling price for product B per unit was $14.50 and the variable costs were $7.25. What is the flexible budget variance for contribution margin for the year for product A? What is the sales volume variance for the year for product B? What is the sales quantity variance for both products? What is the sales mix variance for product A?

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