Busn 278 Week 8 Final Exam 100 All Answers Page 1 Tco The Type
BUSN 278 – Week 8 Final Exam ***100% All correct answers***
1. (TCO 1) The type of budget that is prepared for the expected capacity level only is called a _______. (Points : 5)
2. (TCO 2) Which of the following is not a quantitative forecasting method? (Points : 5)
Moving average model
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.
4. (TCO 4) Marketing expenses typically increase in proportion to ________. (Points : 5)
number of customer orders.
5. (TCO 5) Which of the following is not true of the decision packages used in zero-base budgeting? (Points : 5)
Decision packages should include alternative methods of performing the activity.
Decision packages may cross functional and organizational lines.
Decision packages can be either mutually exclusive or incremental.
Decision packages may cover either short-term or long-term periods.
6. (TCO 6) When using the payback period technique, the payback period is expressed in terms of _______. (Points : 5)
7. (TCO 6) The accounting rate of return method is based on ___________ (Points : 5)
the time value of money data.
cash flow data.
8. (TCO 6) A company projects annual cash inflows of $90,000 each year for the next five years if it invests $450,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $150,000. What is the accounting rate of return on this investment? (Points : 5)
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)
10. (TCO 6) Selma Inc. is comparing several alternative capital budgeting projects as shown below:
Projects A B C
Initial Investment $40,000 $60,000 $80,000
Present value of cash inflows $60,000 $55,000 $100,000
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.
11. (TCO 6) A company has a minimum required rate of return of 10%. It is considering investing in a project that costs $210,000 and is expected to generate cash inflows of $85,000 at the end of each year for four years. The approximate net present value of this project is _______. (Points : 5)
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
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 months sales as ending inventory. How many units should Sargent.Com produce during June? (Points : 5)
Not enough information to determine.
14. (TCO 8) Which of the following is not a cause of profit variance? (Points : 5)
Changes in sales price
Changes in sales mix
Changes in sales volume
All of the above are causes of profit variance
15. (TCO 9) A static budget is appropriate for __________ (Points : 5)
variable overhead costs.
direct materials costs.
fixed overhead costs.
none of these.
16. (TCO 9) If costs are not responsive to changes in activity level, how are they best described? (Points : 5)
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)
18. (TCO 10) What do you call a budget report that is prepared to report on unusual events that require immediate attention? (Points : 5)
1. (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?
A master budget is made up of multiple minor budgets:
2. (TCO 9) Distinguish between fixed budgets and flexible budgets. When are each an appropriate means of evaluating a managers performance and why? (Points : 20)
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:
Part (a) The net present value.
Part (b) The internal rate of return.
Part (c) The payback period. (Points : 30)
4. (TCO 7) Roswell Company has budgeted sales revenue as follows for the next 4 months as follows:
Past 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. (Points : 30)
5. (TCO 8) Eastern Companys budgeted and actual sales for 2009 were:
Product Budgeted Sales Actual Sales
A 35,300 units at $2.00 per unit 32,700 units at $2.60 per unit
B 27,900 units at $5.00 per unit 29,200 units at $4.70 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)
6. (TCO 9) Herbart Company gathered the following information on power costs and factory machine usage for the last six months:
Power Cost Factory Machine Hours
January $24,400 13,900
February 30,300 17,600
March 29,000 16,800
April 22,340 13,200
May 19,900 11,600
June 14,900 6,600
Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers.
Part (a) What is the estimated variable portion of power costs per factory machine hour?
Part (b) What is the estimated fixed power cost each month?
Part (c) If it is estimated that 10,000 factory machine hours will be run in July, what is the expected
total power cost for July? (Points : 30)