BUSN 278 Midterm Exam Answers

BUSN 278 Midterm Exam Answers

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BUSN 278 Midterm Exam Answers

(TCO 1) Which of the following statements regarding research and development is incorrect?

(TCO 2) Priority budgeting that ranks activities is known as:

(TCO 3) The regression statistic that measures how many standard errors the coefficient is from zero is the ________________

(TCO 4) It is important that budgets be accepted by:

(TCO 5) The qualitative forecasting method that individually questions a panel of experts is ________________

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

(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.

(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.

(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

(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 ($000s)
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?

(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?

(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.