1.Question : (TCO
1) The type of budget that is updated on a regular basis is known as a
________________
continuous budget.
revised budget.
updated budget.
flexible budget.
Instructor Explanation: Chapter 1, Page 8
2.Question : (TCO 2) The quantitative forecasting
method that uses actual sales from recent time periods to predict future sales
assuming that the closest time period is a more accurate predictor of future
sales is:
Moving average model
Weighted moving average model
Closest moving average model
Exponential smoothing model
Instructor Explanation: Chapter 15, Page 236
3.Question : (TCO 3) The regression statistic that
measures how many standard errors the coefficient is from zero is the
________________
correlation coefficient.
coefficient of determination.
standard error of the estimate.
t-statistic.
Instructor Explanation: Chapter 16, Page 247
4.Question : (TCO 4) Capital expenditures are incurred
for all of the following reasons except:
As preventive maintenance
To counteract competition
Decreased production
Improvement in product quality
Instructor Explanation: Chapter 13, Page 201
5.Question : (TCO 5) Which of the following is not true
when ranking proposals using zero-base budgeting?
Due to changing
circumstances, a low-priority item may later become a high-priority item.
Decision packages
are ranked in order of increasing benefit.
Divisional and departmental managers submit initial
recommendations, with top management making the final ranking.
Nonfunded packages
should also be ranked.
Instructor Explanation: Chapter 21, Page 324
6.Question : (TCO 6) Which of the following ignores the
time value of money?
Internal rate of return
Profitability index
Net present value
Payback period
Instructor Explanation: Chapter 20, Page 296
7.Question : (TCO 1) There are several approaches that
may be used to develop the budget. Managers typically prefer an approach known
as participative budgeting. Discuss this
form of budgeting and identify its advantages and disadvantages.
8.Question : (TCO 2) There are a variety of forecasting
techniques that a company may use. Identify and discuss the three main
quantitative approaches used for time series forecasting models.
9.Question : (TCO 2) The Federal Election Commission
maintains data showing the voting age population, the number of registered
voters, and the turnout for federal elections. The following table shows the
national voter turnout as a percentage of the voting age population from 1972
to 1996 (The Wall Street Journal Almanac; 1998):
Voter Turnout
Year % Turnout Year %
Turnout
1972 55 1986 36
1974 38 1988 50
1976 54 1990 37
1978 37 1992 55
1980 53 1994 39
1982 40 1996 49
1984 53
Part (a) Use exponential smoothing to forecast this time
series. Consider smoothing constants of a = 0.1 and 0.2. What is the forecast
of the percentage of turnout in 1998?
Part (b) Use the mean absolute deviation (MAD) to determine
which smoothing constant provides the best forecast of voter turnout.
10.Question : (TCO
3) Use the table “Food and Beverage Sales for Paul’s Pizzeria” to answer the
questions below.
Food and Beverage Sales for Paul’s Pizzeria Restaurant
($000s)
Month First Year Second Year
January 55 60
February 53 54
March 53 56
April 63 44
May 64 44
June 54 34
July 33 36
August 35 37
September 25 28
October 30 30
November 35 38
December 54 52
Part (a) Calculate the regression line and forecast sales
for March of Year 3.
Part (b) Calculate the seasonal forecast of sales for March
of Year 3.
Part (c) Which forecast do you think is most accurate and
why?
11.Question : (TCO 6) Jackson Company is considering two
capital investment proposals. Estimates regarding each project are provided
below:
Project Nuts Project Bolts
Initial Investment $175,000 $100,000
Annual Net Income $30,000 52,000
Annual Cash Inflow $70,000 $45,000
Salvage Value $0 $0
Estimated Useful Life 3
years 3 years
The company requires a 9% rate of return on all new
investments.
Part (a) Calculate the payback period for each project.
Part (b) Calculate the net present value for each project.
Part (c) Which project should Jackson Company accept and
why?
12.Question : (TCO 6) Top Growth Farms, a farming
cooperative, is considering purchasing a tractor for $468,000. The machine has
a 10-year life and an estimated salvage value of $32,000. Top Growth uses
straight-line depreciation. Top Growth estimates that the annual cash flow will
be $78,000. The required rate of return is 9%.
Part (a) Calculate the payback period.
Part (b) Calculate the net present value.
Part (c) Calculate the accounting rate of return.
