# BUSN278 Midterm Exam

1.

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.

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