(TCO 1) A common starting point in the budgeting process is _____.(Points : 5) 

expected future net incomepast performanceto motivate the sales forcea 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 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.

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) A disadvantage of the payback period technique is that it _____. (Points : 5)ignores obsolescence factors ignores the cost of an investment is complicated to use ignores the time value of money

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 initial 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) Bradshaw Inc. is contemplating a capital investment of $85,000. The cash inflows over the project’s 4 years are as follows. YearExpected Cash Inflow1$18,0002$25,0003$35,0004$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) Selma Inc. is comparing several alternative capital budgeting projects as shown below. ProjectsABCInitial Investment$40,000$60,000$80,000Present 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

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)$13,800 $1,794 $886 $2,748

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) 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 : 5)1,915 2,200 1,885 Not enough information to determine

Question 14. 14. (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

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) If the activity level increases 10%, total variable costs will _____. (Points : 5)remain the same increase by more than 10% decrease by less than 10% increase 10%

Question 17. 17. (TCO 9) Using the high-low method, what is the unit variable cost for the following information? MonthMilesTotal CostJanuary80,000$96,000February50,000$80,000March70,000$94,000April90,000$130,000(Points : 5)$1.44 $1.25 $1.60 $1.50

Question 18. 18. (TCO 10) What do you call a budget report that is prepared to report on unusual events that require immediate attention?(Points : 5)

 

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Herbart Company gathered the following information on power costs and factory machine usage for the last 6

months.

Power Cost

January $24,400

February 30,300

March 29,000

April 22,340

May 19,900

June 14, 900

Factory Machine Hours 

January 13,900

February 17,600

March 16,800

April 13,200

May 11,600

June 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) ATTACHMENT PREVIEW Download attachment(TCO 9) Herbart Company gathered the following information on power costs and factorymachine usage for the last 6 months.Power CostFactory MachineHoursJanuary$24,40013,900February30,30017,600March29,00016,800April22,34013,200May19,90011,600June14,9006,600Using the high-low method of analyzing costs, answer the following questions and showcomputations 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 ±xed power cost each month?Part (c): If it is estimated that 10,000 factory machine hours will be run in July, what is theexpected total power cost for July?(Points : 30)

Step

 

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