10.(TCO 6) Hyde Inc. is comparing several alternative capital budgeting projects as shown below:
Projects
A
B
C
Initial Investment
$110,000
$90,000
$50,000
Present value of cash inflows
$100,000
$100,000
$60,000
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.
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 : 5)
$59,442
$1,387
$65,375
$5,161
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
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 months 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.
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
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
16.(TCO 9) If costs are not responsive to changes in activity level, how are they best described? (Points : 5)
Mixed
Flexible
Variable
Fixed
17.(TCO 9) Using the high-low method, what is the unit variable 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 : 5)
$1.44
$1.25
$1.60
$1.50.
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
1.(TCO 7) The cash budget is one of the primary financial budgets. Discuss the importance of the cash budget. Identify the individual sections of the cash budget and the information included in each section.(Points : 20)
2.(TCO 9) Distinguish between fixed budgets and flexible budgets. When are each an appropriate means of evaluating a managers performance and why? (Points : 20)
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) Roswell Company has budgeted sales revenue as follows for the next 4 months as follows:
February
$150,000
March
$120,000
April
$105,000
May
$165,000
Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible.
Prepare a schedule which shows expected cash receipts from sales for the month of May. (Points : 30)
5.(TCO 8) Northern Companys budgeted and actual sales for 2009 were:
Product
Budgeted Sales
Actual Sales
A
6,000 units at $8.00 per unit
6,810 units at $7.80 per unit
B
5,000 units at $10.00 per unit
4,720 units at $10.40 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)
6.(TCO 9) Herbart Company gathered the following information on power costs and factory machine usage for the last six months:
Power Cost
Factory Machine Hours
January
$24,400
13,900
February
30,300
17,600
March
29,000
16,800
April
22,340
13,200
May
19,900
11,600
June
14,900
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)