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DeVry BUSN 278 Final Exam

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1.(TCO 1) A common starting point in the budgeting process is
_____.(Points : 5)
expected future net income
past performance
to motivate the sales force
a clean slate, with no expectations
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 isnotan example of a
seasonal variation?(Points : 5)
Increased restaurant sales on Fridays and Saturdays
Increased retail sales in the fourth quarter
Increased sales of jet skis in the summer
Increased sales resulting from a special promotion

Question 4.4.(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 with 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.
Question 5.5.(TCO 5) Program budgeting does not include_____.(Points :
5)
controlling
programming
budgeting
planning
Question 6.6.(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 decision
is relatively easy to compute and understand
considers the expected profitability of a project
Question 7.7.(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


nitial investment by the total cash flows
initial investment by the present value of cash flows
Question 8.8.(TCO 6) A company projects annual cash inflows of $90,000
each year for the next 5 years if it invests $450,000 in new equipment.
The equipment has a 5-year life and an estimated salvage value of
$150,000. What is the accounting rate of return on this
investment?(Points : 5)
6.7%
13.3%
20%
33.3%
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) 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
$60,000 $55,000 $100,000
cash inflows

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

Question 11.11.(TCO 6) Cleaners, Inc. is considering purchasing


equipment costing $30,000 with a 6-year useful life. The equipment will
provide cost savings of $7,300 and will be depreciated straight-line over
its useful life with no salvage value. Cleaners requires a 10% rate of
return. What is the approximate net present value of this
investment?(Points : 5)

Question 12.12.(TCO 7) Which of the following is not an operating


budget?(Points : 5)

Question 13.13.(TCO 7) If the required materials to be purchased are


18,000 pounds, the production needs are three times the direct
materials purchases, and the beginning direct materials are three and a
half times the direct materials purchases, what are the desired ending
direct materials in pounds?(Points : 5)

Question 14.14.(TCO 8) Which of the following is not a cause of profit


variance?(Points : 5)

Question 15.15.(TCO 9) A static budget is appropriate in evaluating a


manager's performance if_____.(Points : 5)

Question 16.16.(TCO 9) If costs are not responsive to changes in activity


level, how are they best described?(Points : 5)

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)

Question 18.18.(TCO 10) What is the method used to determine whether


the budgeting process is operating effectively?(Points : 5)

5.(TCO 8) Eastern Companys budgeted and actual sales for 2009 were as
follows.

Product
A
B

Budgeted Sales
Actual Sales
35,300 units at $2.00 per unit 32,700 units at $2.60 per unit
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)

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) Farris Co.s projected sales are as follows.

August
September
October

$240,000
$270,000
$330,000

Farris estimates that it will collect 30% in the month of sale, 50% in the
month after the sale, and 18% in the second month following the sale. Two
percent of all sales are estimated to be bad debts.How much are Farris Co.'s
budgeted cash receipts for October?(Points : 30)

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
February
March
April
May
June

$24,400
30,300
29,000
22,340
19,900
14,900

13,900
17,600
16,800
13,200
11,600
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 expectedtotal power cost for July?(Points : 30)

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)

1.(TCO 7) At Lakeside Manufacturing, budgets are the responsibility of


everyone. Each department collaborates in determining its expected needs,
and sales personnel determine the likely sales volume. Al Talbott, one of the
production managers, believes in building plenty of slack into everything,
including his estimates of ending inventory of work in process. As the

accounting manager, write a memo to Mr. Talbott, explaining why the ending
inventory figure should be extremely accurate, with as little slack as
possible.(Points : 20)

DeVry BUSN 278 Final Exam

Click on the link below for the solution:

http://devryfinalexams.com/products/busn-278-final-exam/

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