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| October 22, 2018

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)

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