DeVry BUSN 278 Final Exam – New 2016

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Question

Question 1.1. (TCO 1) The type of budget that is prepared for the expected capacity level only is called a _______. (Points : 5)
static budget.
flexible budget.
continuous budget.
master budget.
Question 2.2. (TCO 2) Which of the following is not a qualitative forecasting method? (Points : 5)
Executive opinions
Sales force polling
Delphi method
Classical decomposition
Question 3.3. (TCO 3) Which of the following is not used to evaluate the accuracy of regression results? (Points : 5)
Mean absolute deviation
Coefficient of determination
Prediction confidence interval
T-statistic
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 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.
Question 6.6. (TCO 6) When using the payback period technique, the payback period is expressed in terms of _____.
(Points : 5)
a percentage
dollars
years
months
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 company projects annual cash inflows of $85,000 each year for the next 5 years if it invests $300,000 in new equipment.The equipment has a 5-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%
Question 9.9. (TCO 6) Bradshaw Inc. is contemplating a capital investment of $85,000. The cash inflows over the project’s 4 years are as follows.
Year
Expected Cash Inflow
1
$18,000
2
$25,000
3
$35,000
4
$20,000
The payback period is _____.
(Points : 5)
2.17 years
3.35 years
2.30 years
3.47 years
Question 10.10. (TCO 6) Munson Inc. is comparing several alternative capital budgeting projects as shown below.
Projects
A
B
C
Initial Investment
$150,000
$55,000
$95,000
Present value of cash inflows
$200,000
$65,000
$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
Question 11.11. (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 4 years. The approximate net present value of this project is _____.
(Points : 5)
$59,442
$1,387
$65,375
$5,161
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) 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 each month 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 company to meet its goals? (Points : 5)
107,400 units
102,000 units
96,600 units
138,000 units
Question 14.14. (TCO 8) A variance that results from expected economic conditions that do not materialize is called what? (Points : 5)
Sales variance
Planning variance
Economic variance
Material variance
Question 15.15. (TCO 9) A static budget is appropriate in evaluating a manager's performance if _____.
(Points : 5)
actual activity closely approximates the master budget activity
actual activity is less than the master budget activity
the company prepares reports on an annual basis
the company is a not-for-profit organization
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) 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 amounted to $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
$8,400
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.

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Question 1.1. (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) 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 (b): As a manager, which cost behavior would you prefer and why? (Points : 20) Question 3.3. (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) Question 4.4. (TCO 7) Roswell Company has budgeted sales revenue as follows for the next 4 months as follows. February $150,000 March $120,000 April $105,000 May $165,000 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) Question 5.5. (TCO 8) Eastern Company’s budgeted and actual sales for 2009 were as follows. 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) Question 6.6. (TCO 9) Herbart Company gathered the following information on power costs and factory machine usage for the last 6 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)

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