1.1 Responsibility Accounting Handout

Mindanao State University
College of Business Administration and Accountancy

DEPARTMENT OF ACCOUNTANCY
Marawi City
RESPONSIBILITY ACCOUNTING
Accounting 143
COST CENTER
1. Shown below is a comparison between the budgeted and actual costs data for the
Mixing Department headed by Mr. Bin Jadid Macapaar.
Budget Actual
Salaries and wages P 20,000 P 20,000
Supplies 8,000 12,000
Postage, telephone and telegraph 2,500 3,700
Repairs and maintenance 4,000 2,500
Depreciation 3,000 2,000
Light and water 2,000 2,800
The decrease in depreciation cost and repairs and maintenance is due to the disposal of
an equipment during the period. The disposal was approved by the Vice President for
Production when the Mixing Department reported that the equipment was not functioning
efficiently. On the other hand, the increase in light and water cost is due to the
adjustment in power rates imposed by Manila Electric Company.
Required: Determine the amount of cost variance that must be considered in evaluating
the performance of the Mixing Department.
REVENUE CENTER
2. Mr. Sanny-din Usodan is one of the managers of Capital Ventures. He is in charge of the
Sales Division of said company. For 2011, Capital Ventures expects a budgeted sales
revenue of 200,000 from its Sales Division. At year-end, record shows a total sales
revenue of P300,000, 25% of which was solely brought about by the negotiation
between the manager of the Production Division and Mr. Yasser Mabaning, one of the
company’s newest customers.
Required: Determine the amount of sales variance that must be considered in

evaluating the performance of the Mr. Sanny-din Usodan.
PROFIT CENTER
3. The following information pertains to the product produced by the Men’s Belt Division of
Leather Goods Corporation:
Selling price per unit P 150
Manufacturing costs per unit:
Prime costs 75
Variable factory overhead 15
Fixed factory overhead (Total is P80,000) 8
Selling and administrative costs per unit:
Variable 18
Fixed (Total is P60,000) 6
During the period, the Division produced 10,000 units and sold 9,000 units both as
budgeted. There was no beginning and ending work in process inventories and there
was no beginning finished goods inventory during the period.
There was no difference between the total budgeted and total actual fixed costs.
Variable manufacturing costs vary with production while variable selling costs vary with
sales. Central administration costs are allocated to the different divisions of the
company. For this period, central administration cost allocated to Men’s Belt Division
amounted to P150,000. In addition, 40% of the fixed costs are controllable by the
manager of the division and the tax rate for the year is 30%.
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Required: Determine the manufacturing margin, contribution margin, controllable margin
(short-run performance margin), segment margin, operating income and net income of
the Men’s Belt Division. Also, determine at what amount should be compared with the
budget to evaluate the performance of the Men’s Belt Division and the manager of the
Men’s Belt Division respectively?
INVESTMENT CENTER
4. The Ladies’ Belt Division of Leather Goods Corporation is classified as an investment
center. For the month of November, it had the following operating statistics.
Sales P 675,000
Cost of goods sold 400,000
Operating expenses 237,500
Average working capital 250,000
Average plant and equipment 350,000
Other assets (idle) 150,000
Shareholder’s equity 500,000
Desired rate of return 15%
Weighted average cost of capital 10%
In addition, Leather Goods Corporation is subject to an income tax rate of 30%.
Required: Determine the return on investment and the residual income using the
company’s total assets, total working capital and total assets employed as investment
base respectively.
5. The following year-end data pertain to Adan Corporation:

P2,000,00
Sales 0
Cost of goods sold 1,000,000
Operating expenses 200,000
Non-current assets, at book value 3,200,000
Non-current assets, at current market value 3,500,000
Current assets, at book value 800,000
Current assets, at current market value 1,000,000
Current liabilities 400,000
Non-current liabilities 1,000,000
Adan Corporation pays an income tax rate of 30%. Its weighted average cost of capital
is 10% while its desired rate of return on its projects is 15%.
Required: Determine the EVA (economic valued added) of Adan Corporation.
6. Carlyle Company had the following information pertaining to 2011:

Net income P 100,000
Sales 1,000,000
Asset turnover 2 times
Desired minimum rate 15%
Required: Determine the ROI, ROS and the amount of assets of Carlyle Company.
“What you say and what you believe are important but it is what you do
that defines your character.”
Anonymous
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Mindanao State University

College of Business Administration and Accountancy

Required: Determine the amount of sales variance that must be considered in

Page | 1 Prepared by: MSB

5. The following year-end data pertain to Adan Corporation:

Required: Determine the EVA (economic valued added) of Adan Corporation.

6. Carlyle Company had the following information pertaining to 2011:

Page | 2 Prepared by: MSB

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