Gargiulo Company, a 90% Owned Subsidiary of Posito Corporation, Sells

question 23

Multiple Choice

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2010. Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. Compute the equity in earnings of Gargiulo reported on Posito's books for 2012.

• A) $84,600.
• B) $84,375.
• C) $83,925.
• D) $84,825.
• E) $84,850.

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Definitions:

Perfection Standards

Standards that represent ideal performance levels or the absence of defects in products or processes.

Quantity Standard

A benchmark or norm for the amount of materials, labor, and overhead required to produce a unit of output in a given period.

Performance Level

A measurement of the efficiency and effectiveness of a process or activity.

Labour Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, often used to assess workforce efficiency or cost control.