Grading Summary
These are the automatically computed results Date Taken:
of your exam. Grades for essay questions,
Time Spent:
and comments from your instructor, are in the
Points Received:
"Details" section below.
Question Type:
182 / 190
# Of Questions:
# Correct:
Multiple Choice
6
5
Essay
6
N/A
Grade Details - All Questions
1.
Question :
Student Answer:
(TCO 1) The type of budget that is updated on a regular basis is
known as a ________________
continuous budget.
revised budget.
updated budget.
flexible budget.
Instructor Explanation:
Points Received:
Chapter 1, Page 8
5 of 5
Comments:
2.
Question :
Student Answer:
(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:
Moving average model
Weighted moving average model
Closest moving average model
Exponential smoothing model
Instructor Explanation:
Points Received:
Chapter 15, Page 236
5 of 5
Comments:
3.
Question :
Student Answer:
(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.
t-statistic.
Instructor Explanation:
Points Received:
Chapter 16, Page 247
5 of 5
Comments:
4.
Question :
Student Answer:
(TCO 4) Capital expenditures are incurred for all of the following
reasons except:
As preventive maintenance
To counteract competition
Decreased production
Improvement in product quality
Instructor Explanation:
Points Received:
Chapter 13, Page 201
5 of 5
Comments:
5.
Question :
Student Answer:
(TCO 5) Which of the following is not true when ranking proposals
using zero-base budgeting?
Due to changing circumstances, a low-priority item may later
become a high-priority item.
Decision packages are ranked in order of increasing benefit.
Divisional and departmental managers submit initial
recommendations, with top management making the final ranking.
Nonfunded packages should also be ranked.
Instructor Explanation:
Points Received:
Chapter 21, Page 324
5 of 5
Comments:
6.
Question :
Student Answer:
(TCO 6) Which of the following ignores the time value of money?
Internal rate of return
Profitability index
Net present value
Payback period
Instructor Explanation:
Points Received:
Chapter 20, Page 296
5 of 5
Comments:
7.
Question :
Student Answer:
Instructor Explanation:
(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.
Participative budgeting or sometimes knows as the bottom up budgeting is a
budgeting system where all members from top to down in an organization is
being given an opportunity of applying their own budgets. This type of budgets
are being prepared with the input of subordinate managers as well. The
advantages of this type of budgeting is that it motivates the employees because
they are now being considered to prepare the budgets on their own and achieve
the targets rather than imposing on them. Moreover it helps to give much better
results in an organization as each and every member is equally involve in setting
budgets and implementing them. Finally it helps to improve the quality of
forecasts. The disadvantages of participative budgeting is that setting and
designing these budgets are very time consuming and cannot be suitable when
the managers needs to make quick decisions.Moreover the biggest disadvantage
might be a problem of budgetary slack. There are likely chances that budgets
might be overstated to achieve better results but this can lead to a problem of
budgetary slack which arises with a difference of true estimated budget and the
overstated budget.
Participative budgeting is a bottom-up approach to budgeting where
departmental managers provide input for their budget. The benefit of
this approach is that managers typically have more experience and
knowledge regarding the daily operations of their department, which
allows them to create a more realistic budget. In addition, managers
who participate in the budget process are more motivated to achieve
budget goals, and there is usually greater support for the budget.
A disadvantage of participative budgeting is that it can often be timeconsuming and costly. In addition, if budgets are used as a means of
performance evaluation, it may encourage budgetary slack, where
managers underestimate sales and overestimate costs to create budget
values that are easier to obtain.
Points Received:
20 of 20
Comments:
8.
Question :
Student Answer:
(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.
The three main quantitative approaches used for time series forecasting models
are 1) Moving average 2) Exponential Smoothing 3)Weighted moving average
Moving average is one of the quantitative approach which are being used to
emphasize the direction of the trend forecast and to smooth out the volume and
price fluctuation.They are generally being used to measure the momentum in any
given data. Exponential smoothing is another quantitative approach which is
used to produce a smoothed time series. This method gives more accurate
results as compared to moving average because recent observations are given
relatively more weight in forecasting than the older observations. Weighted
moving average is the approach which average the price series or any given
data in order to smooth the data series thereby helping to give more accurate
forecasts. This type of approach is being used in markets where there are
frequent ups and downs and it helps data to smooth.
Instructor Explanation:
Points Received:
The moving average model uses actual sales from recent time periods
to predict future sales, assuming that each time period has an equal
influence on the prediction of futures sales. The weighted moving
average model also uses actual sales from recent time periods to
predict future sales, but it assumes that the closest time period is a
more accurate predictor of future sales than previous time periods. The
exponential smoothing model uses a smoothing constant called alpha
as an adjustment when determining the forecast. We assign a value to
alpha based on our assumption of the relationship between sales in one
period and sales in the next period. A higher value is assigned to alpha
when we believe that current sales are more predictive of future sales,
and a lower value is assigned to alpha when we believe that a
smoothed forecast is more predictive of future sales.
20 of 20
Comments:
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):
Year
1972
1974
1976
1978
1980
1982
1984
Voter Turnout
% Turnout
Year
55
1986
38
1988
54
1990
37
1992
53
1994
40
1996
53
% Turnout
36
50
37
55
39
49
Part (a) Use exponential smoothing to forecast this time
series. Consider smoothing constants of a = 0.1 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.
Student Answer:
Year %Turnout a = 0.1 MAD_1 a = 0.2 MAD_2 1972 55 55 0.0 55 0.0 1974 38
55.0 17.0 55.0 17.0 1976 54 53.3 0.7 51.6 2.4 1978 37 53.4 16.4 52.1 15.1 1980
53 51.7 1.3 49.1 3.9 1982 40 51.9 11.9 49.9 9.9 1984 53 50.7 2.3 47.9 5.1 1986
36 50.9 14.9 48.9 12.9 1988 50 49.4 0.6 46.3 3.7 1990 37 49.5 12.5 47.1 10.1
1992 55 48.2 6.8 45.0 10.0 1994 39 48.9 9.9 47.0 8.0 1996 49 47.9 1.1 45.4 3.6
1997 48.0 48.0 0.0 46.1 1.9 1998 48.0 48.0 46.5 46.5 MAD 9.6 10.0 Part a)
when a = 0.1, the forecast of the percenge of turnout in 1998 is 48%. when a =
0.1, the forecast of the percenge of turnout in 1998 is 46.5%. Part (b) Use the
mean absolute deviation (MAD) to determine which smoothing constant provides
the best forecast of voter turnout when a = 0.1, the MAD is 9.6. when a = 0.1,
the MAD is 10. So, a = 0.1 provides the best forecast of voter
turnout. Calculations done in excel
Instructor Explanation:
Part (a) Using an excel spreadsheet, the forecasted percentage of voter
turnout in 1998 is 48.02% using a smoothing constant of 0.1 and
46.14% using a smoothing constant of 0.2.
Part (b) Using an excel spreadsheet, the MAD for a smoothing
constant of 0.1 is 7.11 and the MAD for a smoothing constant of 0.2 is
7.69. Therefore, the smoothing constant of 0.1 provides the best
forecast of voter turnout.
Points Received:
25 of 30
Comments:
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
Month
January
February
March
April
May
June
July
August
September
October
November
December
($000s)
First Year
55
53
53
63
64
54
33
35
25
30
35
54
Second Year
60
54
56
44
44
34
36
37
28
30
38
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?
Student Answer:
Instructor Explanation:
Part a) y = -0.7117x + 53.355 R² = 0.1742 34 non seasonally adjusted Part b) 40
seasonally adjusted Part c) 40 is the more accurate forecast All calculations are
done in excel
Part (a) Using an excel spreadsheet, the regression line is y = 53.36 –
.71x. Based on this regression line, the sales forecast for March of Year
3 is $34.14 (in thousands).
Part (b) Using an excel spreadsheet, the seasonal forecast of sales for
March of Year 3 is $40.06 (in thousands).
Part (c) Responses will vary. Students should discuss whether they
believe there is a trend in the data.
Points Received:
30 of 30
Comments:
11.
Question :
(TCO 6) Jackson Company is considering two capital investment
proposals. Estimates regarding each project are provided below:
Initial Investment
Annual Net Income
Annual Cash Inflow
Salvage Value
Estimated Useful Life
Project Nuts
$175,000
$30,000
$70,000
$0
3 years
Project Bolts
$100,000
52,000
$45,000
$0
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?
Student Answer:
Instructor Explanation:
Project Nuts a)Payback period = Initial investment / net annual cash inflows =
175000 / 70000 = 2.5 years b)Net present value = -175000 + (70000x0.9174) +
(70000 x 0.8417) + ( 70000 x 0.7722) = $2191 Project bolts a)Payback period =
100000 / 45000 = 2.22 years b) Net present value = -100000 + (45000 x 0.9174)
+ (45000x0.8417) + (45000x0.7722) = $13909 From the above results it can be
interpreted that Project Bolts should be accepted as it is giving higher net present
value and moreover the payback period is also good as the initial investment is
being covered more quickly.
Part (a) Project Nuts payback period = $175,000 ÷ $70,000 = 2.50
years
Project Bolts payback period = $100,000 ÷ $45,000 = 2.22
years
Part (b) Project Nuts NPV = ($70,000 x 2.5313) - $175,000 = $2,191
Project Bolts NPV = ($45,000 x 2.5313) - $100,000 = $13,909
Part (c) – Because Project Bolts has a lower payback period and
greater net present value than Project Nuts, Jackson Company should
accept this project.
Points Received:
Comments:
30 of 30
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.
Student Answer:
Instructor Explanation:
Part a) Payback period = Initial investment / net cash inflows = 468000 / 78000 =
6 Years Part b) Net present value = -468000 + (78000x5.99525) +
(110000x0.42241) = $ 46095 Ans Part c) Accounting rate of return = Average
accounting profit / initial investment = 34400/468000 x 100 = 7.35%
Part (a) Payback period: $468,000 ÷ $78,000 = 6 years
Part (b) Net present value: Present value of cash flows = $78,000 x
6.4177 = $500,581
Present value of salvage value = $320,000 x .4224 = $13,517
Net Present value = $500,581 + $13,517 - $468,000 = $46,098
Part (c) Accounting rate of return: Average investment = ($468,000 +
$32,000) ÷ 2 = $250,000
Annual depreciation = ($468,000 - $32,000) ÷ 10 = $43,600
Annual net income = $78,000 - $43,600 = $34,400
Accounting rate of return = $34,400 ÷ $250,000 = 13.76%
Points Received:
Comments:
27 of 30