Word Doc for busn 78 Final

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1. (TCO 1) Which one of the following is not a benefit of budgeting? (Points : 5)

It facilitates the coordination of activities. It provides definite objectives for evaluating performance. It provides assurance that the company will achieve its objectives. It provides early warning signs of potential threats.

Question 2. 2. (TCO 2) “Groupthink” is a primary disadvantage of which qualitative forecasting method? (Points : 5)

Executive opinions Sales force polling Delphi method Consumer surveys

Question 3. 3. (TCO 3) Which of the following statements regarding the t-statistic is true? (Points : 5)

The t-statistic cannot be negative. The t-statistic measures how many standard errors the coefficient is away from the independent variable. The higher the t-value, the more confidence we have in the coefficient. Low t-values indicate high reliability.

Question 4. 4. (TCO 4) Marketing expenses typically increase in proportion to _____. (Points : 5)

number of customer orders. advertising dollars. sales dollars. salespersons’ salaries.

Question 5. 5. (TCO 5) Which of the following is true when ranking proposals using zero-base budgeting? (Points : 5)

Nonfunded packages should not be ranked. Adjustments are not allowed once the ranking is complete. Due to changing circumstances, a low-priority item may later become a high-priority item. Decision packages are ranked in order of increasing benefit.

Question 6. 6. (TCO 6) A disadvantage of the payback period technique is that it _____. (Points : 5)

ignores obsolescence factors ignores the cost of an investment is complicated to use ignores the time value of money

Question 7. 7. (TCO 6) All of the following statements about the accounting rate of return method are correct except that it _____. (Points : 5)

considers the profitability of a capital expenditure ignores the salvage value of an investment does not consider the time value of money uses income data rather than 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)

26.7% 45.5% 7.8% 18.74%

Question 9. 9. (TCO 6) If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its 10-year life, and generates annual net cash inflows of $30,000 each year, the payback period is _____. (Points : 5)

5 years 6 years 7 years 8 years

Question 10. 10. (TCO 6) Hyde Inc. is comparing several alternative capital budgeting projects as shown below.

Projects	A	B	C
Initial Investment	$110,000	$90,000	$50,000
Present value of cash inflows	$100,000	$100,000	$60,000

Using the profitability index, rank the projects, starting with the most attractive. (Points : 5)

A, C, B A, B, C C, A, B 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)

$177,170 $35,000 $17,718 $2,191

Question 12. 12. (TCO 7) Which of the following is not an operating budget? (Points : 5)

Selling and administrative expense budget Direct materials budget Pro forma balance sheet Pro forma income statement

Question 13. 13. (TCO 7) Sargent.Com plans to sell 2,000 purple lawn chairs during May, 1,900 in June, and 2,000 during July. The company keeps 15% of the next month’s sales as ending inventory. How many units should Sargent.Com produce during June? (Points : 5)

1,915 2,200 1,885 Not enough information to determine

Question 14. 14. (TCO 8) Standards that are based on efficient activity with allowances for unavoidable losses are called _____. (Points : 5)

basic standards maximum efficiency standards currently attainable standards expected standards

Question 15. 15. (TCO 9) A static budget _____. (Points : 5)

should not be prepared in a company is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs shows planned results at the original budgeted activity level 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)

Mixed Multiple Variable Fixed

Question 17. 17. (TCO 9) Using the high-low method, what is the unit variable cost for the following information?

Month	Miles	Total Cost
January	80,000	$96,000
February	50,000	$80,000
March	70,000	$94,000
April	90,000	$130,000

(Points : 5)

$1.44 $1.25 $1.60 $1.50.

Question 18. 18. (TCO 10) Which of the following statements regarding budget reports is incorrect? (Points : 5)

The cost of budget reports should not outweigh the benefits. Budget reports are used for planning, control, and information. Reports prepared for upper management typically have fewer details than reports prepared for lower level managers. Reports are prepared more frequently for upper management than for lower level managers.

1. (TCO 7) The cash budget is one of the primary financial budgets. Discuss the importance of the cash budget. Identify the individual sections of the cash budget and the information included in each section. (Points : 20)

Question 2. 2. (TCO 9) Distinguish between fixed budgets and flexible budgets. When are each an appropriate means of evaluating a manager’s performance and why? (Points : 20)

Question 3. 3. (TCO 6) Tom Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the sport, and he is thinking about going into the batting cage business. He estimates that the construction of a state-of-the-art building and the purchase of necessary equipment will cost $630,000. Both the facility and the equipment will be depreciated over 12 years using the straight-line method and are expected to have zero salvage values. His required rate of return is 10%. Estimated annual net income and cash flows are $49,000 and $101,500, respectively. For this investment, calculate the following. Part (a): the net present value Part (b): the internal rate of return Part (c): the payback period (Points : 30)

Question 4. 4. (TCO 7) The management of Horton Company estimates that credit sales for August, September, October, and November will be $270,000, $375,000, $420,000, and $240,000, respectively. Experience has shown that collections are made as follows.

In month of sales	25%
In first month after sale	60%
In second month after sales	10%

Determine the collections from customers in October and November. Show all computations. (Points : 30)

Question 5. 5. (TCO 8) Northern Company’s budgeted and actual sales for 2009 were as follows.

Product	Budgeted Sales	Actual Sales
A	6,000 units at $8.00 per unit	6,810 units at $7.80 per unit
B	5,000 units at $10.00 per unit	4,720 units at $10.40 per unit

Part (a): Calculate the sales volume variance. Part (b): Calculate the sales price variance. Part (c): Calculate the total sales variance. (Points : 30)

Question 6. 6. (TCO 9) Mace Company accumulates the following data concerning a mixed cost, using miles as the activity level.

	Miles Driven	Total Cost
January	10,000	$15,000
February	8,000	13,500
March	9,000	14,400
April	7,500	12,500

Compute the variable and fixed cost elements using the high-low method. (Points : 30)

Word Doc for busn 78 Final

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