Question 1. 1. (TCO 1) A common starting point in the budgeting process is _____. (Points : 5)
[removed] expected future net income
[removed] past performance
[removed] to motivate the sales force
[removed] a clean slate, with no expectations
Question 2. 2. (TCO 2) Which of the following is not a qualitative forecasting method? (Points : 5)
[removed] Executive opinions
[removed] Sales force polling
[removed] Delphi method
[removed] Classical decomposition
Question 3. 3. (TCO 3) Which of the following is not an example of a seasonal variation? (Points : 5)
[removed] Increased restaurant sales on Fridays and Saturdays
[removed] Increased retail sales in the fourth quarter
[removed] Increased sales of jet skis in the summer
[removed] Increased sales resulting from a special promotion
Question 4. 4. (TCO 4) Which of the following statements regarding the risk associated with R & D activities is incorrect? (Points : 5)
[removed] The amount of time between the R & D activity and the cash flows from the project does not affect risk.
[removed] Greater risk is associated with creating new products than with improving existing products.
[removed] Risk increases as the time between the R & D activity and the cash flows from the project increases.
[removed] Assessing risk is a vital part of research and development.
Question 5. 5. (TCO 5) Which of the following is true when ranking proposals using zero-base budgeting? (Points : 5)
[removed] Nonfunded packages should not be ranked.
[removed] Adjustments are not allowed once the ranking is complete.
[removed] Due to changing circumstances, a low-priority item may later become a high-priority item.
[removed] Decision packages are ranked in order of increasing benefit.
Question 6. 6. (TCO 6) When using the payback period technique, the payback period is expressed in terms of _____.
(Points : 5)
[removed] a percentage
Question 7. 7. (TCO 6) The accounting rate of return method is based on _____.
(Points : 5)
[removed] income data
[removed] the time value of money data
[removed] market values
[removed] cash flow data
Question 8. 8. (TCO 6) A project that cost $80,000 with a useful life of 5 years is being considered. Straight-line depreciation is being used and salvage value is $5,000. The project will generate annual cash inflows of $21,375. The accounting rate of return is _____.
(Points : 5)
Question 9. 9. (TCO 6) Brady Corp. is considering the purchase of a piece of equipment that costs $23,000.
Projected net annual cash flows over the project’s life are as follows.
Expected Cash Inflow
The payback period is _____. (Points : 5)
[removed] 2.63 years
[removed] 2.80 years
[removed] 2.20 years
[removed] 2.37 years
Question 10. 10. (TCO 6) Hyde Inc. is comparing several alternative capital budgeting projects as shown below.
Present value of cash inflows
Using the profitability index, rank the projects, starting with the most attractive. (Points : 5)
[removed] A, C, B
[removed] A, B, C
[removed] C, A, B
[removed] C, B, A
Question 11. 11. (TCO 6) A company has a minimum required rate of return of 9%. It is considering investing in a project that costs $175,000 and is expected to generate cash inflows of $70,000 at the end of each year for 3 years. The approximate net present value of this project is _____. (Points : 5)
Question 12. 12. (TCO 7) Which of the following would not appear as a fixed expense on a selling and administrative expense budget? (Points : 5)
[removed] Office salaries
[removed] Property taxes
Question 13. 13. (TCO 7) If the required materials to be purchased are 18,000 pounds, the production needs are three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds? (Points : 5)
Question 14. 14. (TCO 8) Which of the following is not a cause of profit variance? (Points : 5)
[removed] Changes in sales price
[removed] Changes in sales mix
[removed] Changes in sales volume
[removed] All of the above are causes of profit variance.
Question 15. 15. (TCO 9) A static budget _____.
(Points : 5)
[removed] should not be prepared in a company
[removed] is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs
[removed] shows planned results at the original budgeted activity level
[removed] is changed only if the actual level of activity is different from what is originally budgeted
Question 16. 16. (TCO 9) Which of the following is not a cost classification? (Points : 5)
Question 17. 17. (TCO 9) Using the high-low method, what is the fixed cost for the following information?
(Points : 5)
Question 18. 18. (TCO 10) Which of the following statements regarding budget reports is incorrect? (Points : 5)
[removed] The cost of budget reports should not outweigh the benefits.
[removed] Budget reports are used for planning, control, and information.
[removed] Reports prepared for upper management typically have fewer details than reports prepared for lower level managers.
[removed] Reports are prepared more frequently for upper management than for lower level managers.