BUSN 278 Week 4 Midterm Exam Latest Version

1. (TCO 1) Why are budgets useful in the planning process?

2. (TCO 2) The quantitative forecasting method that uses actual sales from recent time periods to predict future sales, assuming each period has equal influence on the prediction of future sales, is the _____.

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

4. (TCO 4) Capital expenditures are incurred for all of the following reasons except _____.

5. (TCO 5) Which of the following is not true when ranking proposals using zero-base budgeting?

6. (TCO 6) Which of the following ignores the time value of money?

7. (TCO 1) Budgeting is a planning and control system. Discuss how budgeting contributes to these two functions of management.

8. (TCO 2) There are a variety of forecasting techniques that a company may use. Identify and discuss the four main qualitatative approaches, including their advantages and disadvantages.

9. (TCO 2) Use the table Television Sales Time Series to answer the questions below.

Television Sales Time Series (in thousands)
Day	Sales	Day	Sales
1	24.0	9	26.0
2	25.0	10	27.0
3	26.0	11	27.0
4	27.0	12	26.5
5	28.5	13	28.0
6	28.0	14	27.0
7	27.0	15	29.0
8	27.5

Part (a): What is the project sales for Day 16 using a 3-day moving average?
Part (b): What is the project sales for Day 16 using a 6-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. (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?

11. (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. (TCO 6) Mimi Company is considering a capital investment of $250,000 in new equipment. The equipment is expected to have a 5-year useful life with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $75,000, respectively. Mimi's minimum required rate of return is 10%.

Part (a): Calculate the payback period.
Part (b): Calculate the net present value.
Part (c): Calculate the accounting rate of return