Devry BUSN278 Midterm Exam ANSWERS

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 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.