Busn 278 Midterm Exam 100 All Answers Instructor S Explanations

BUSN 278 Midterm Exam

100% All correct answers + Instructor’s explanations

1. Question : (TCO 1) It is important that budgets be accepted by:

Division managers

Department heads


All of these

2. Question : (TCO 2) The qualitative forecasting method that individually questions a panel of experts is ________________

executive opinions.

sales force polling.

the Delphi method.

consumer surveys.

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.


4. Question : (TCO 4) Which of the following statements regarding research and development is incorrect?

R&D should be greater in high-technology divisions.

R&D should focus on the current products.

R&D should be consistent with the department’s goals.

A critical aspect of R&D is assessing risk.

5. Question : (TCO 5) Priority budgeting that ranks activities is known as:

Top-down budgeting

Bottom-up budgeting

Zero-base budgeting

Participative budgeting

6. Question : (TCO 6) Which of the following is a disadvantage of the payback technique?

It is difficult to calculate.

It relies on the time value of money.

It can only be calculated when there are equal annual net cash flows.

It ignores the expected profitability of a project.

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) Use the table “Manufacturing Capacity Utilization” to answer the questions below.

Manufacturing Capacity Utilization
In Percentages
Day Utilization Day Utilization
1 82.5 9 78.8
2 81.3 10 78.7
3 81.3 11 78.4
4 79.0 12 80.0
5 76.6 13 80.7
6 78.0 14 80.7
7 78.4 15 80.8
8 78.0

Part (a) What is the project manufacturing capacity utilization for Day 16 using a three day moving average?
Part (b) What is the project manufacturing capacity utilization for Day 16 using a six day moving average?
Part (c) Use the mean absolute deviation (MAD) and mean square error (MSE) to determine which average provides the better forecast.

10. Question : (TCO 3) Use the table “Food and Beverage Sales for Luigi’s Italian Restaurant” to answer the questions below.

Food and Beverage Sales for Luigi’s Italian Restaurant
Month First Year Second Year
January 218 237
February 212 215
March 209 223
April 251 174
May 256 174
June 216 135
July 131 142
August 137 145
September 99 110
October 117 117
November 137 151
December 213 208

Part (a) Calculate the regression line and forecast sales for February of Year 3.
Part (b) Calculate the seasonal forecast of sales for February of Year 3.
Part (c) Which forecast do you think is most accurate and why?

11. Question : (TCO 6) Davis Company is considering two capital investment proposals. Estimates regarding each project are provided below:

Project A Project B
Initial Investment $800,000 $650,000
Annual Net Income $50,000 45,000
Annual Cash Inflow $220,000 $200,000
Salvage Value $0 $0
Estimated Useful Life 5 years 4 years

The company requires a 10% 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.

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