1. (TCO 1) The type of budget that is prepared for the expected capacity level only is called a _______. (Points : 14) A. static budget. B. flexible budget. C.continuous budget. D.master budget.
2. (TCO 2) “Groupthink” is a primary disadvantage of which qualitative forecasting method? (Points : 14) A. Executive opinions B. Sales force polling C. Delphi method D. Consumer surveys
3. (TCO 3) Which of the following is not used to evaluate the accuracy of regression results? (Points : 14) A.Mean absolute deviation B. Coefficient of determination C.Prediction confidence interval D.T-statistic
4. (TCO 4) Which of the following statements regarding the risk associated with R&D activities is incorrect? (Points : 14) A.The amount of time between the R&D activity and the cash flows from the project does not affect risk. B. Greater risk is associated with creating new products than improving existing products. C.Risk increases as the time between the R&D activity and the cash flows from the project increases. D.Assessing risk is a vital part of research and development.
5. (TCO 5) Which of the following is not true of the decision packages used in zero-base budgeting? (Points : 14) A.Decision packages should include alternative methods of performing the activity. B. Decision packages may cross functional and organizational lines. C. Decision packages can be either mutually exclusive or incremental. D. Decision packages may cover either short-term or long-term periods.
6. (TCO 6) A disadvantage of the payback period technique is that it ________. (Points : 14) A. ignores obsolescence factors. B. ignores the cost of an investment. C. is complicated to use. D. ignores the time value of money.
7. (TCO 6) All of the following statements about the accounting rate of return method are correct except that it ________ (Points : 14) A.considers the profitability of a capital expenditure. B. ignores the salvage value of an investment. C. does not consider the time value of money. D. uses income data rather than cash flow data.
8. (TCO 6) A project that cost $80,000 with a useful life of five 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 : 14) A. 26.7% B. 45.5% C. 7.8% D. 18.74%
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 : 14) A. 5 years B. 6 years C. 7 years D. 8 years
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 : 14) A) A, C, B. B) A, B, C. C) C, A, B. D) 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 : 14) A. $59,442 B. $1,387 C. $65,375 D. $5,161
12. (TCO 7) Which of the following is not an operating budget? (Points : 14) A.Selling and administrative expense budget B. Direct materials budget C. Pro forma balance sheet D. 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 month’s sales as ending inventory. How many units should Sargent.Com produce during June? (Points : 14) A. 1,915 B. 2,200 C. 1,885 D. Not enough information to determine.
14. (TCO 8) Standards that are based on efficient activity with allowances for unavoidable losses are called _______ (Points : 14) A. basic standards. B. maximum efficiency standards. C. currently attainable standards. D. expected standards.
15. (TCO 9) A static budget is appropriate in evaluating a manager’s performance if _______________. (Points : 14) A. actual activity closely approximates the master budget activity B. actual activity is less than the master budget activity C. the company prepares reports on an annual basis D. the company is a not-for-profit organization
16. (TCO 9) If costs are not responsive to changes in activity level, how are they best described? (Points : 14) A. Mixed B. Flexible C. Variable D, Fixed
17. (TCO 9) Using the high-low method, what is the fixed 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 : 14) A. $17,500 B. $36,000 C. $14,000 D.$50,000
18. (TCO 10) What do you call a budget report that is prepared to report on unusual events that require immediate attention? (Points : 14) A. Advance report B. Special report C. Unique report D. Progress report
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