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Devry Busn278 Final Exam




Question;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.2. (TCO 2) Which of the following is not a qualitative forecasting method? (Points: 5)Executive opinionsSales force pollingDelphi methodClassical decomposition3. (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.4. (TCO 4) Which of the following statements regarding the risk associated with R&D activities is incorrect? (Points: 5)The amount of time between the R&D activity and the cash flows from the project does not affect risk.Greater risk is associated with creating new products than improving existing products.Risk increases as the time between the R&D activity and the cash flows from the project increases.Assessing risk is a vital part of research and development.5. (TCO 5) Program budgeting does not include: (Points: 5)ControllingProgrammingBudgetingPlanning6. (TCO 6) The payback period technique ___________ (Points: 5)should be used as a final screening tool.can be the only basis for the capital budgeting relatively easy to compute and understand.considers the expected profitability of a project.7. (TCO 6) The profitability index is computed by dividing the ___________ (Points: 5)total cash flows by the initial investment.present value of cash inflows by the present value of each outflow.initial investment by the total cash flows.initial investment by the present value of cash flows.8. (TCO 6) A company projects annual cash inflows of $85,000 each year for the next five years if it invests $300,000 in new equipment. The equipment has a five-year life and an estimated salvage value of$75,000. What is the accounting rate of return on this investment? (Points: 5)28.3%13.3%15%43.3%9. (TCO 6) If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $30,000 each year, the payback period is _____.(Points: 5)5 years6 years7 years8 years10. (TCO 6) Hyde Inc. is comparing several alternative capital budgeting projects as shown below:Projects A B CInitial Investment $110,000 $90,000 $50,000Present value of cash inflows $100,000 $100,000 $60,000Using 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.11. (TCO 6) Cleaners, Inc. is considering purchasing equipment costing $30,000 with a six-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over itsuseful life with no salvage value. Cleaners requires a 10% rate of return. What is the approximate net present value of this investment? (Points: 5)$13,800$1,794$886$2,74812. (TCO 7) Which of the following would not appear as a fixed expense on a selling and administrative expense budget? (Points: 5)Freight-outOffice salariesProperty taxesDepreciation13. (TCO 7) A company budgeted unit sales of 102,000 units for January, 2008 and 120,000 units for February, 2008. The company has a policy of having an inventory of units on hand at the end of eachmonth equal to 30% of next month?s budgeted unit sales. If there were 30,600 units of inventory on hand on December 31, 2007, how many units should be produced in January, 2008 in order for the companyto meet its goals? (Points: 5)107,400 units102,000 units96,600 units138,000 units14. (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.15. (TCO 9) A static budget is appropriate for __________ (Points: 5)variable overhead materials costs.fixed overhead costs.none of these.16. (TCO 9) If the activity level increases 10%, total variable costs will ___________. (Points: 5)remain the sameincrease by more than 10%decrease by less than 10%increase 10%17. (TCO 9) At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amountedto $6,000. Using the high-low method, what is the estimated fixed cost element of power costs? (Points: 5)$12,000$6,000$3,600$8,40018. (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.Page 21. (TCO 7) The first step in creating the master budget is the sales budget. Describe this budget and the information it includes. Why is the accuracy of the sales budget important? (Points: 20)2. (TCO 9) Understanding how costs behave can help managers plan operations and choose between various courses of action.Part (a) Identify and describe the three types of cost behavior, including examples of each Part.Part (b) As a manager, which cost behavior would you prefer and why? (Points: 20)3. (TCO 6) Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $65,000, respectively. Yappy requires a 10% return on all new investments.Part (a) Compute each of the following:1: Payback period.2: Net present value.3: Profitability index.4: Internal rate of return.5: Accounting rate of return.(b) Indicate whether the investment should be accepted or rejected. (Points: 30)4. (TCO 7) Roswell Company has budgeted sales revenue as follows for the next 4 months as follows:February$150,000March$120,000April$105,000May$165,000Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible.Prepare a schedule which shows expected cash receipts from sales for the month of May.5. (TCO 8) Eastern Company?s budgeted and actual sales for 2009 were:ProductBudgeted SalesActual SalesA35,300 units at $2.00 per unit32,700 units at $2.60 per unitB27,900 units at $5.00 per unit29,200 units at $4.70 per unitPart (a) Calculate the sales volume variance.Part (b) Calculate the sales price variance.Part (c) Calculate the total sales variance.6. (TCO 9) The Mays Clinic has the following monthly telephone records and costs:CallsCosts2,000$2,4001,5002,0002,2002,6002,5002,9002,3002,7001,7002,200Identify the fixed and variable cost elements using the high-low method.


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