BUSN278 Midterm Exam v1 Complete Solution

BUSN278 Midterm Exam v.1 A Graded++ 1. Question : (TCO 1) The type of budget that is updated on a regular basis is known as a ________________ continuous budget. revised budget. updated budget. flexible budget. 2. Question : (TCO 2) The quantitative forecasting method that uses actual sales from recent time periods to predict future sales assuming that the closest time period is a more accurate predictor of future sales is: Moving average model Weighted moving average model Closest moving average model Exponential smoothing model   3. Question : (TCO 3) The regression statistic that measures how many standard errors the coefficient is from zero is the ________________ correlation coefficient. coefficient of determination. standard error of the estimate. t-statistic. 4. Question : (TCO 4) Capital expenditures are incurred for all of the following reasons except: As preventive maintenance To counteract competition Decreased production Improvement in product quality  5. Question : (TCO 5) Which of the following is not true when ranking proposals using zero-base budgeting? Due to changing circumstances, a low-priority item may later become a high-priority item. Decision packages are ranked in order of increasing benefit. Divisional and departmental managers submit initial recommendations, with top management making the final ranking. Nonfunded packages should also be ranked.   6. Question : (TCO 6) Which of the following ignores the time value of money? Internal rate of return Profitability index Net present value Payback period 7. Question : (TCO 1) There are several approaches that may be used to develop the budget. Managers typically prefer an approach known as participative budgeting. Discuss this form of budgeting and identify its advantages and disadvantages. 8. Question : (TCO 2) There are a variety of forecasting techniques that a company may use. Identify and discuss the three main quantitative approaches used for time series forecasting models. 9. Question : (TCO 2) The Federal Election Commission maintains data showing the voting age population, the number of registered voters, and the turnout for federal elections. The following table shows the national voter turnout as a percentage of the voting age population from 1972 to 1996 (The Wall Street Journal Almanac; 1998): Voter Turnout Year % Turnout Year % Turnout 1972 55 1986 36 1974 38 1988 50 1976 54 1990 37 1978 37 1992 55 1980 53 1994 39 1982 40 1996 49 1984 53 Part (a) Use exponential smoothing to forecast this time series. Consider smoothing constants of a = 0.1 and 0.2. What is the forecast of the percentage of turnout in 1998? Part (b) Use the mean absolute deviation (MAD) to determine which smoothing constant provides the best forecast of voter turnout. 10. Question : (TCO 3) Use the table “Food and Beverage Sales for Paul’s Pizzeria” to answer the questions below. Food and Beverage Sales for Paul’s Pizzeria Restaurant ($000s) Month First Year Second Year January 55 60 February 53 54 March 53 56 April 63 44 May 64 44 June 54 34 July 33 36 August 35 37 September 25 28 October 30 30 November 35 38 December 54 52 Part (a) Calculate the regression line and forecast sales for March of Year 3. Part (b) Calculate the seasonal forecast of sales for March of Year 3. Part (c) Which forecast do you think is most accurate and why? 11. Question : (TCO 6) Jackson Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Nuts Project Bolts Initial Investment $175,000 $100,000 Annual Net Income $30,000 52,000 Annual Cash Inflow $70,000 $45,000 Salvage Value $0 $0 Estimated Useful Life 3 years 3 years The company requires a 9% rate of return on all new investments. Part (a) Calculate the payback period for each project. Part (b) Calculate the net present value for each project. Part (c) Which project should Jackson Company accept and why? 12. Question : (TCO 6) Top Growth Farms, a farming cooperative, is considering purchasing a tractor for $468,000. The machine has a 10-year life and an estimated salvage value of $32,000. Top Growth uses straight-line depreciation. Top Growth estimates that the annual cash flow will be $78,000. The required rate of return is 9%. Part (a) Calculate the payback period. Part (b) Calculate the net present value. Part (c) Calculate the accounting rate of return.

BUSN278 Midterm ExamGraded

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