BUSN 278 Midterm Exam ANSWERS
Question :
(TCO 1) The type of budget that is updated on a regular basis is known as a ________________
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:
3.
Question :
(TCO 3) The regression statistic that measures how many standard errors the coefficient is from zero is the ________________
4.
Question :
(TCO 4) Capital expenditures are incurred for all of the following reasons except:
5.
Question :
(TCO 5) Which of the following is not true when ranking proposals using zero-base budgeting?
6.
Question :
(TCO 6) Which of the following ignores the time value of money?
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 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 Pauls Pizzeria to answer the questions below.
Food and Beverage Sales for Pauls 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.
