Division Y of automobile spare parts; manufactures motors and budgets to transfer 72 motors to Division Z and to sell 48 motors to external customers. The standard cost information per motor for Division Y is as follows:
Variable cost per motor: Rs. 100 per motor; fixed production overhead and fixed selling & administrative overhead per motor: Rs. 150. In order to set the external selling price the company uses a 44 % mark up on total standard cost.
Required: Identify the sales if the transfer price is set at the total production cost.

• A) Rs. 17,280
• B) Rs. 35,280
• C) Rs. 18,000
• D) Rs. 720

Return on Investment (ROI) can be improved by:

• A) increase in expenses.
• B) increasing the investment.
• C) increasing the sales.
• D) decreasing sales.

Identify the profitability of index of” Project A” if Present value of inflows and Present value of outflows are Rs. 176,213 and 213,225 respectively.

• A) 1.00
• B) 0.83
• C) None of the given options
• D) 1.21

Identify the Coefficient of variation if “stock of company C” has 8 % standard deviation, 16% expected return and cost of capital of the project of “Company C” is 9%?

• A) 0.50
• B) 2.00
• C) 1.78
• D) 0.89

Which of the following “Capital budgeting technique” ignores the concept of time value of money?

• A) Net present value
• B) Payback period
• C) Profitability index
• D) Internal rate of return

Sale price per unit=Rs. 1800
Variable cost= Rs.1300
Fixed cost= Rs.310,000
Break-even point (units)= ?

• A) 238 units
• B) 620 units
• C) 580 units
• D) 600 units

Project should be accepted for investment if:

• A) weighted average cost of capital >cost of debt
• B) weighted average cost of capital < internal rate of return
• C) weighted average cost of capital = internal rate of return
• D) weighted average cost of capital > internal rate of return

Which of the following is not a method of “capital budgeting”?

• A) Profitability index
• B) Equivalent annual annuity
• C) Internal rate of return
• D) Incremental pension plan

Present value of outflows= Rs. 165,500
Present value of inflows= Rs. 269,300
Profitability index= ?

• A) 0.91
• B) 1.63
• C) 0.61
• D) 1.51

Residual Income is evaluation measure of which of the following?

• A) None of the given options
• B) Profit center
• C) Investment center
• D) Cost center

Which of the following is most appropriate for Economic Value Added (EVA)?

• A) It measures the Economic performance of division.
• B) It measures the operating expenses of division.
• C) It measures the Accounting profit of division.
• D) It measures the net income of division.

Following information has been extracted for the year to calculate the sales margin of RC Company.
Cost of Capital: Rs. 340,000 and Net income: Rs. 250,000 and Sales revenue: Rs.700,000
Find the sales margin with the help of provided information.

• A) 74 %
• B) 36 %
• C) 84 %
• D) 13 %

It is assumed that the initial investment for “Project A” is Rs. 170,000. Cash flows are Rs. 40,000, Rs. 90,000, and Rs. 50,000 in the first, second third year respectively.
Required: Identify the payback period of Project A.

• A) 3.00 year
• B) 2.80 year
• C) 2.00 year
• D) 2.40 year

Project with unconventional cash flows can have either ………………or ………………… IRR.

• A) Positive, double
• B) Single, double
• C) Double, positive
• D) Negative, multiple

Which of the following is not an advantage of IRR?

• A) Results are expressed as a simple percentage
• B) It takes into account the time value of money
• C) It is easily understood as compare to other methods
• D) Unconventional cash flows can have negative IRR

Following information has been extracted for the year to find the Return on Investment of ABC Company.
Return: Rs. 590,000; investment: Rs. 4,690,000 and Sales: Rs. 4,900,000
Find the Return on Investment with the help of provided information.

• A) 36%
• B) Required more information
• C) 13%
• D) 1.04%

A rational investor accepts the project if the net present value of the project is __________ and rejects if net present value of the project is ________.

• A) Positive; negative
• B) Negative; negative
• C) At breakeven point; positive
• D) Positive; at breakeven point

Which of the following is (are) benefit(s) of Critical Path Method (CPM)?

• A) Useful in monitoring costs
• B) Mathematically simple
• C) All of the given options
• D) Give critical path and slack time

Which of the following statement is correct for “Project Evaluation & Review Technique”?

• A) It shows the inter relationship of various jobs which makeup the overall project and clearly identify the critical path of the project.
• B) It focuses on successful completion of program in the shortest possible time.
• C) It was developed by US navy for planning and controlling of Polaris missile program.
• D) All of the given options

Cost based transfer pricing is appropriate:

• A) Whenever profit responsibility is centralized and each division is operated on a cost center basis.
• B) Whenever profit responsibility is decentralized and each division is operated on a cost center basis.
• C) Whenever profit responsibility is centralized and each division is operated on a profit center basis.
• D) Whenever profit responsibility is decentralized and each division is operated on a standard cost basis.