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

Question 11. 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 4 years. The approximate net present value of this project is _____. (Points : 5)

$59,442 $1,387 $65,375 $5,161

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) A company budgeted unit sales of 102,000 units for January, 2008 and 120,000 units for February, 2008. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 30,600 units of inventory on hand on December 31, 2007, how many units should be produced in January, 2008 in order for the company to meet its goals? (Points : 5)

107,400 units 102,000 units 96,600 units 138,000 units

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 for _____. (Points : 5)

variable overhead costs direct materials costs fixed overhead costs None of the above

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 fixed 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)

$17,500 $36,000 $14,000 $50,000

Question 18. 18. (TCO 10) Which of the following statements regarding budget reports is incorrect? (Points : 5)

The cost of budget reports should not outweigh the benefits. Budget reports are used for planning, control, and information. Reports prepared for upper management typically have fewer details than reports prepared for lower level managers. Reports are prepared more frequently for upper management than for lower level managers.