Last Updated 30 Aug 2020

Business Exam: Budgeting and Forecasting

Category business
Essay type Research
Words 1345 (5 pages)
Views 448

Haven’t found the relevant content? Hire a subject expert to help you with Business Exam: Budgeting and Forecasting

Hire verified expert
1. (TCO 7) At Lakeside Manufacturing, budgets are the responsibility of everyone. Each department collaborates in determining its expected needs, and sales personnel determine the likely sales volume. Al Talbott, one of the production managers, believes in building plenty of slack into everything, including his estimates of ending inventory of work in process. As the accounting manager, write a memo to Mr. Talbott, explaining why the ending inventory figure should be extremely accurate, with as little slack as possible. (Points: 20)
2. TCO 9) Garner Company requires its marketing managers to submit estimated cost behavior data on all requests for new products or expansions of a product line. Judy Oslo is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5 per unit. Based on these calculations, the low-volume project would not be profitable. She shares her dismay with Nina Smythe, another manager. Nina strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable since they are mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable.

Part (a) Who are the stakeholders in this decision? Part (b) Is it ethical for Judy to revise the costs as indicated? Briefly explain. Part (c) What should Judy do? (Points: 20)

3. (TCO 6) Tom Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the sport, and he is thinking about going into the batting cage business. He estimates that the construction of a state-of-the-art building and the purchase of necessary equipment will cost $630,000. Both the facility and the equipment will be depreciated over 12 years using the straight-line method and are expected to have zero salvage values. His required rate of return is 10%. The estimated annual net income and cash flows are $49,000 and $101,500, respectively. For this investment, calculate:

Part (a) The net present value. Part (b) The internal rate of return. Part (c) The payback period. (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 that shows expected cash receipts from sales for May. (Points: 30)

5. (TCO 8) Eastern Company’s budgeted and actual sales for 2009 were:

  • Product - Budgeted Sales - Actual Sales
  • A - 35,300 units at $2. 00 per unit - 32,700 units at $2. 0 per unit
  • B - 27,900 units at $5. 00 per unit - 29,200 units at $4. 70 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) Mace Company accumulates the following data concerning a mixed cost, using miles as the activity level.

  • Month - Miles Driven - Total Cost
  • January - 10,000 - $15,000
  • February - 8,000 - 13,500
  • March - 9,000 - 14,400
  • April - 7,500 - 12,500

Compute the variable and fixed cost elements using the high-low method. (Points: 30)

5. (TCO 8) Eastern Company’s budgeted and actual sales for 2009 were:

  • Product - Budgeted Sales - Actual Sales
  • A - 35,300 units at $2. 00 per unit - 32,700 units at $2. 60 per unit
  • B - 27,900 units at $5. 00 per unit - 29,200 units at $4. 70 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)

1. (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.
2. (TCO 2) Which of the following is not a qualitative forecasting method? (Points: 5)Executive opinionsSalesforce pollingDelphi methodClassical decomposition
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.
4. TCO 4) Which of the following statements regarding the risk associated with R&D activities is incorrect? (Points: 5)The amount of time between the R&D activity and the cash flows from the project does not affect risk.A greater risk is associated with creating new products than improving existing products.Risk increases as the time between the R&D activity and the cash flow from the project increases.Assessing risk is a vital part of research and development.
5. (TCO 5) Program budgeting does not include: (Points: 5)ControllingProgrammingBudgetingPlanning
6. (TCO 6) When using the payback period technique, the payback period is expressed in terms of _______. (Points: 5)a percent.dollars.years.months.
7. (TCO 6) The accounting rate of return method is based on ___________ (Points: 5)income data.the time value of money data.market values.cash flow data.
8. (TCO 6) A company projects annual cash inflows of $90,000 each year for the next five years if it invests $450,000 in new equipment. The equipment has a five-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%
9. (TCO 6) If an asset costs $210,000 and is expected to have a $30,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $30,000 each year, the payback period is _____. (Points: 5)5 years6 years7 years8 years
10. (TCO 6) Munson Inc. is comparing several alternative capital budgeting projects as shown below:

  • Projects - A - B - C
  • Initial Investment - $150,000 - $55,000 - $95,000
  • Present value of cash inflows - $200,000 - $65,000 - $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.
11. (TCO 6) A company has a minimum required rate of return of 9%. It is considering investing in a project that costs $175,000 and is expected to generate cash inflows of $70,000 at the end of each year for three years. The approximate net present value of this project is ________. (Points: 5)$177,170$35,000$17,718$2,191
12. (TCO 7) Which of the following is not an operating budget? (Points: 5)Selling and administrative expense budgetDirect materials budgetPro forma balance sheetPro forma income statement
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 units102,000 units96,600 units138,000 units
14. TCO 8) Which of the following is not a cause of profit variance? (Points: 5)Changes in sales priceChanges in the sales mixChanges in sales volumeAll of the above are causes of profit variance
15. (TCO 9) A static budget _____________. (Points: 5)should not be prepared in a companyis useful in evaluating a manager's performance by comparing actual variable costs and planned variable costsshows planned results at the original budgeted activity levelis changed only if the actual level of activity is different than originally budgeted
16. (TCO 9) If costs are not responsive to changes in activity level, how are they best described? (Points: 5)MixedFlexibleVariableFixed
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 evaluationBudget reviewBudget appraisalBudget audit

Haven’t found the relevant content? Hire a subject expert to help you with Business Exam: Budgeting and Forecasting

Hire verified expert

Cite this page

Business Exam: Budgeting and Forecasting. (2016, Dec 31). Retrieved from https://phdessay.com/business-exam-budgeting-and-forecasting/

Not Finding What You Need?

Search for essay samples now

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Save time and let our verified experts help you.

Hire verified expert