CHAPTER 8 (9 questions)
?Understand time value of money –1 question
?Evaluate the acceptability of an investment project using net present value including even and uneven cash flows – 2 questions
?Evaluate the acceptability of an investment project using internal rate of return – 1 question
?Understand payback period with even or uneven cash flows – 1 question
?Understand the simple rate of return – 1 question
?Understand differences and relations among different capital budgeting techniques – 1 question
?Evaluate an investment project that has uncertain cash flow – 1 question
?Rank investment projects in order of preference – 1 question
CHAPTER 9 (8 questions)
?Understand why organizations budget and the processes they use to create budget – 2 questions
?Prepare a master budget – 6 questions
CHAPTER 10 (4 questions)
?Create a flexible budget including activity and spending variances – 4questions
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EXAM 3 – SUMMER ONLINE
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up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 1
4 pts
Which of the following is NOT an advantage of budgeting?
Budgeting helps managers allocate resources
Budgeting assists managers in judging performance
Budgeting helps managers coordinate activities
All of the above are advantages of budgeting
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up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 2
4 pts
Which of the following must be produced before a manufacturing overhead budget can
be created?
sales budget and cash budget
sales budget and productin budget
sales budget and budgeted income statement
sales budget and budgeted balance sheet
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 3
4 pts
1. Wilson Inc. has forecasted a beginning cash balance for the month of November of
$36,000. It has projected sales of $100,000 of which 80% is collected in cash. The
ending accounts receivable balance for October is forecasted to be $25,000 and will
be collected during November. Direct materials, labor, and manufacturing overhead
are forecasted to be $70,000 in total for November. Wilson incurs $10,000 of
depreciation expense per month. It plans on paying dividends of $5,000 in
November. What is the ending cash balance projected for November?
$56,000
$61,000
$66,000
$71,000
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 4
4 pts
Smith Co. has projected raw materials purchases of $194,400 for quarter 1, $293,000 for
quarter 2, and $328,400 for quarter 3. Smith pays for 60% of purchases in the month of
purchase and 40% in the following month. If accounts payable was $81,500 at the
beginning of quarter 1, what is the projected cash disbursement for quarter 2?
$77,760
$175,920
$198,140
$253,560
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Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 5
4 pts
Duff Co. has projected 36,000 units to be produced in August and 31,000 units for
September. Each unit requires 5 feet of input. The company tries to maintain an ending
inventory of 10% of the next month’s materials needed. If ending inventory for July was
18,000 feet, what is the amount of raw materials purchases in feet for August?
333,200 feet
353,000 feet
317,000 feet
43,000 feet
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 6
4 pts
Sander Co. incurs selling and administrative expense at the rate of $3,000,000 per month
plus $4 per unit sold. The $3,000,000 includes $1,200,000 in depreciation expense.
Sales in August were 500,000 units and sales in September were 600,000 units. Selling
and administrative expense is paid 70% in the month incurred and 30% in the next
month. What amount of selling and administrative expense should be included on the
budgeted income statement for September?
$3,000,000
$5,280,000
$5,400,000
$4,200,000
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 7
4 pts
Mike’s Motors manufactures custom made engines for motorcycles. Sales are projected
to be 8,000 in February, 7,500 in March, and 6,800 in April. Mike’s tries to maintain an
ending inventory of 20% of the following month’s sales. What is the number of engines to
be produced in March?
7,360
7,400
6,860
7,640
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 8
4 pts
Which of the following statements incorporates the principles of continuous budgeting?
Managers should roll forward their budget each time a period is complete.
A manager should be held responsible for all items within their control.
Managers of various departments should be involved in teh budgeting process.
Human factors must be accounted for when budgeting.
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 9
4 pts
Marvel Corp. makes and sells custom made tennis shoes. In April, Marvel had a
favorable revenue variance. What factor most likely describes why this happened?
Marvel Corp sold more tennis shoes than expected
Marvel Corp paid a lower cost for materials
New customers paid more for each custom pair of tennis shoes than expected
Marvel Corp experienced a higher cost for input materials from a supplier
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7/31/2019
Quiz: EXAM 3 – SUMMER ONLINE
EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 10
4 pts
What is the purpose of the flexible budget?
To reduce the number of unfavorable variances
To show the costs that should have been incurred at the actual level of activity
To show the costs that should have been incurred at the budgeted level of activity
To create conflict between departments when preparing the static budget
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7/31/2019
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 11
4 pts
Judy’s Dog Grooming using a flexible budget and has the following cost formulas as a
function of dogs groomed (dogs groomed = x) for each month.
Revenue = $16x
Labor = $10x
Administration = $1,700
Other = $2,600
During May, Judy expected to groom 1,600 dogs (the planning budget volume) but
actually groomed 2,100 dogs.
Actual Results were as follows:
Revenue
Labor
Administration
Other
$35,000
$18,000
$1,800
$2,400
What is the revenue variance for May?
$2,100 Unfavorable
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$8,000 Favorable
$1,400 Favorable
$1,600 Unfavorable
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 12
4 pts
Smith Corp. produces and sells custom doorknobs. The company’s flexible budget cost
formula for direct materials (a variable cost) is $10 per unit of output. Smith’s flexible
budget performance report for last month showed a $10,000 favorable spending variance
for direct materials. During that month, 8,000 units were produced. Budgeting activity for
the month had been 7,000 units. What was the actual cost per unit for direct materials?
$10,00
$11.25
$12.86
$8.75
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 13
4 pts
Blu Company has performed a cost analysis of a potential project. Based upon this
analysis, the following cash flows are expected regarding the project:
Cost of equipment required $850,000
Annual net cash receipts
$285,000
Working capital required
$215,000
The project is expected to last 10 years. At that point, the working capital would be
released for reinvestment elsewhere. The salvage value of the equipment is zero. The
company’s required rate of return is 10%.
What is the NPV of the potential project?
$769,093.50
$1,350,000.00
($565,000.00)
$1,033,328.50
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EXAM 3 – SUMMER ONLINE
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 14
4 pts
Thompson Corp. is considering the following capital investments:
Capital Investment
NPV
Project San Diego
$0
Project New York
($310,000)
Project Houston
$540,000
Project Des Moines
$0
Based on a net present value analysis, which of these investments would be acceptable?
San Diego, Houston, & Des Moines
San Diego & Des Moines
New York & Houston
Houston
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EXAM 3 – SUMMER ONLINE
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up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 15
4 pts
Smith Inc. is considering purchasing a piece of equipment that will cost $374,855. If this
purchase is made, the equipment will save Smith Inc $70,000 per year in labor costs. The
equipment is expected to have a useful life of 7 years. What is the internal rate of return
of this investment?
5%
6%
7%
8%
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EXAM 3 – SUMMER ONLINE
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up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 16
4 pts
The president of Glenn Co. is currently exploring an investment that will require an initial
investment of $1,600,000. The investment is expected to create the following cash flows
over the next 5 years:
Year 1: $550,000
Year 2: $670,000
Year 3: $520,000
Year 4: $320,000
Year 5: $210,000
Based on this information, what is the payback period of this potential investment?
2.7 years
3.1 years
3.6 years
4.2 years
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up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 17
4 pts
Management at PlantHouse wants to purchase a new sprinkler machine. The cost of the
machine will be $332,000. However, the purchase of the machine is expected to increase
revenues by $125,000. In 5 years, PlantHouse expects to sell the machine for $112,000.
What is the simple rate of return of this investment?
18.64%
21.25%
24.40%
32.00%
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 18
4 pts
Which of the following is true regarding capital budgeting decisions?
A project with a longer payback period is preferable to a project with a short payback period.
A project with a negative net present value is preferable to a project with a positive net present
value.
A project with an internal rate of return greater than the minimum required rate of return is
preferable to a project that is less than the required rate of return.
A project with a lower profitability index is preferable to a project with a higher profitability index.
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 19
4 pts
When calculating net present value, which of the following is considered a cash outflow?
reduction of costs
incremental revenue
initital investment
salvage value
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EXAM 3 – SUMMER ONLINE
Started: Jul 30 at 5:42pm
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 20
4 pts
You are selecting between three projects which provide the following results:
Project
IRR
Profitability Index
Payback Period
A
12%
1.3
2.5 years
B
8%
1.2
8.1 years
C
15%
1.1
3.2 years
Based on internal rate of return only, rank the projects in order of preference from most
desirable to least desirable.
Project B, Project A, Project C
Project C, Project B, Project A
Project A, Project C, Project B
Project C, Project A, Project B
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reliable internet connection before opening this link. The exam consists of 21 questions and you will have
up to 75 minutes to complete the exam. You will need a calculator, scratch paper, and a copy of the
PRESENT VALUE TABLES (which can be found in your Practice Problems – Chapter 8 folder) to complete
the exam. Good luck!
Question 21
4 pts
Which of the following is considered a capital budgeting decision?
Reassigning employees to new plant locations
Increasing production by 5% for the quarter
The hiring of additional workers during busy season
Leasing a new machine
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