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 month’s 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 manager’s 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 Company’s 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)
