1.The payback method of making capital budgeting decisions gives full consideration to the time value of money.

TrueFalse

2.If new equipment is replacing old equipment, any salvage received from sale of the old equipment should not be considered in computing the payback period of the new equipment.

True False

3.Allocations of corporate headquarters expenses to divisions used in return on investment calculations should be limited to the cost of those actual services provided by central headquarters, which the divisions otherwise would have to provide for themselves.

TrueFalse

4.The return on investment can ordinarily be improved by either increasing sales, reducing expenses, or reducing operating assets.

TrueFalse

5.Service departments, such as accounting, finance, general administration, legal, and personnel, are usually considered to be cost centres. In addition, manufacturing facilities are often considered to be cost centres.

TrueFalse

6.A flexible budget is "flexible" in the sense that a budget can be prepared for any level of activity, but once a budget is set the budget figures are not changed if actual activity later proves to be different than budgeted activity.

TrueFalse