6. Capital budgeting and the post-audit process

Cramer Designs produces a wide range of womens apparel. Three years ago, the company spent $1.2 million to launch its line of designer handbags. Brittany Cramer, the companys CEO and founder, is conducting a post-audit on the handbag line to determine how the divisions performance compared to the companys expectations. She has found that the revenue from the handbag division was much lower than expected; however, the company was able to produce the handbags for a much lower cost per unit than expected. Which of the following should be considered the main purpose(s) of a post-audit? Check all that apply.

It encourages managers to generate reasonable forecasts.

It helps project the firms tax liability.

It helps improve operations.

When a firm is forced to employ capital rationing, it generally means that the firm has positive NPV projects than it can finance.