BUSN 278 Midterm Exam 100 % Correct 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 10year life and an estimated salvage value of $32,000. Top Growth uses straightline 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.