Question 1. 1. (TCO 1) Which one of the following is not a
benefit of budgeting? (Points : 5)
It facilitates
the coordination of activities.
It provides
definite objectives for evaluating performance.
It provides
assurance that the company will achieve its objectives.
It provides
early warning signs of potential threats.
Question 2. 2. (TCO 2) Which of the following is not a
quantitative forecasting method? (Points : 5)
Moving average
model
Classical
decomposition
Delphi method
Simple
regression
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) 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 accounting rate of return method
is based on _____.
(Points : 5)
income data
the time value
of money data
market values
cash flow data
Question 8. 8. (TCO 6) A project that cost $80,000 with a
useful life of 5 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 : 5)
26.7%
45.5%
7.8%
18.74%
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) 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 9%. It is considering investing in a project that costs
$175,000 and is expected to generate cash inflows of $70,000 at the end of each
year for 3 years. The approximate net present value of this project is _____.
(Points : 5)
$177,170
$35,000
$17,718
$2,191
Question 12. 12. (TCO 7) Which one of the following is not
needed in preparing a production budget? (Points : 5)
Budgeted unit
sales
Budgeted raw
materials
Beginning
finished goods units
Ending finished
goods units
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)
45,000
9,000
27,000
18,000
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) 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 18. 18. (TCO 10) What is the method used to
determine whether the budgeting process is operating effectively? (Points : 5)
Budget
evaluation
Budget review
Budget
appraisal
Budget audit
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