(TCO 1) A common starting point in the budgeting process is _____.(Points : 5)

expected future net income

past performance

to motivate the sales force

a clean slate, with no expectations

Question 2. 2. (TCO 2) Groupthink is a primary disadvantage of which qualitative forecasting method?(Points : 5)

Executive opinions Sales force polling Delphi method Consumer surveys

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) Marketing expenses typically increase in proportion to _____. (Points : 5)

number of customer orders. advertising dollars. sales dollars. salespersons salaries.

Question 5. 5. (TCO 5) Which of the following is not true of the decision packages used in zero-base budgeting?(Points : 5)

Decision packages should include alternative methods of performing the activity. Decision packages may cross functional and organizational lines. Decision packages can be either mutually exclusive or incremental. Decision packages may cover either short-term or long-term periods.

Question 6. 6. (TCO 6) A disadvantage of the payback period technique is that it _____. (Points : 5)

ignores obsolescence factors ignores the cost of an investment is complicated to use ignores the time value of money

Question 7. 7. (TCO 6) The profitability index is computed by dividing the _____. (Points : 5)

total cash flows by the initial investment present value of cash inflows by the present value of each outflow initial investment by the total cash flows initial investment by the present value of cash flows

Question 8. 8. (TCO 6) A company projects annual cash inflows of $90,000 each year for the next 5 years if it invests $450,000 in new equipment. The equipment has a 5-year life and an estimated salvage value of $150,000. What is the accounting rate of return on this investment?(Points : 5)

6.7% 13.3% 20% 33.3%

Question 9. 9. (TCO 6) Bradshaw Inc. is contemplating a capital investment of $85,000. The cash inflows over the projects 4 years are as follows.

Year	Expected Cash Inflow
1	$18,000
2	$25,000
3	$35,000
4	$20,000

The payback period is _____. (Points : 5)

2.17 years 3.35 years 2.30 years 3.47 years

Question 10. 10. (TCO 6) Selma Inc. is comparing several alternative capital budgeting projects as shown below.

Projects	A	B	C
Initial Investment	$40,000	$60,000	$80,000
Present value of cash inflows	$60,000	$55,000	$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) Cleaners, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. What is the approximate net present value of this investment?(Points : 5)

$13,800 $1,794 $886 $2,748

Question 12. 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

Question 13. 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

Question 14. 14. (TCO 8) Standards that are based on efficient activity with allowances for unavoidable losses are called _____. (Points : 5)

basic standards maximum efficiency standards currently attainable standards expected standards

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 17. 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

Question 18. 18. (TCO 10) What do you call a budget report that is prepared to report on unusual events that require immediate attention?(Points : 5)

Advance report Special report Unique report Progress report