All Related Questions of Budgeting

Q: Examine the following tables from the 2009 Financial Trend Monitoring Report for

Examine the following tables from the 2009 Financial Trend Monitoring Report for the Town of Oakdale that reports on fiscal year 2008. The performance indicators selected are total revenue and revenue...

Q: The following information is provided about the Village of Wymette’s General Fund

The following information is provided about the Village of Wymette’s General Fund operating statement and budgetary accounts for the fiscal year ended June 30, 2010. Required a. Di...

Q: Choose the best answer. 1. An often used approach

Choose the best answer. 1. An often used approach to budgeting that simply derives the New Year’s budget from the current year’s budget is called: a. Planning-programming-budgeting. b. Incremental bud...

Q: A portion of the General Fund operating budget for Southwest City’s Street

A portion of the General Fund operating budget for Southwest City’s Street Department follows here and on subsequent pages. Required After reading and evaluating the budget informat...

Q: The police chief of the Town of Meridian submitted the following budget

The police chief of the Town of Meridian submitted the following budget request for the police department for the forthcoming budget year 2011–12. Upon questioning by the newly app...

Q: “The sole objective of budgeting in a governmental entity is to

“The sole objective of budgeting in a governmental entity is to demonstrate compliance with appropriation legislation.” Do you agree or disagree? Explain.

Q: What is the difference between two types of line-item budgeting

What is the difference between two types of line-item budgeting approaches—incremental budgeting and zero-based budgeting? Which of the two approaches is more widely used by governments?

Q: Describe the advantages of performance budgeting and program budgeting over incremental budgeting

Describe the advantages of performance budgeting and program budgeting over incremental budgeting in a governmental entity.

Q: Haskin Company was founded 40 years ago and now has several manufacturing

Haskin Company was founded 40 years ago and now has several manufacturing plants in the Northeast and Midwest. The evaluation of proposed capital expenditures became increasingly difficult for managem...

Q: Are the capital budgeting criteria we discussed applicable to not-for

Are the capital budgeting criteria we discussed applicable to not-for-profit corporations? How should such entities make capital budgeting decisions? What about the U.S. government? Should it evaluate...

Q: You are discussing a project analysis with a coworker. The project

You are discussing a project analysis with a coworker. The project involves real options, such as expanding the project if successful, or abandoning the project if it fails. Your coworker makes the fo...

Q: In our capital budgeting examples, we assumed that a firm would

In our capital budgeting examples, we assumed that a firm would recover all of the working capital it invested in a project. Is this a reasonable assumption? When might it not be valid?

Q: Why does traditional NPV analysis tend to underestimate the true value of

Why does traditional NPV analysis tend to underestimate the true value of a capital budgeting project?

Q: You recently went to work for Allied Components Company, a supplier

You recently went to work for Allied Components Company, a supplier of auto repair parts used in the after-market with products from Daimler, Chrysler, Ford, and other automakers. Your boss, the chief...

Q: A company is considering two mutually exclusive expansion plans. Plan A

A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.4 million per...

Q: A mining company is deciding whether to open a strip mine,

A mining company is deciding whether to open a strip mine, which costs $2 million. Net cash inflows of $13 million would occur at the end of Year 1. The land must be returned to its natural state at a...

Q: Discuss the following statement: If a firm has only independent projects

Discuss the following statement: If a firm has only independent projects, a constant WACC, and projects with normal cash flows, the NPV and IRR methods will always lead to identical capital budgeting...

Q: How are project classifications used in the capital budgeting process?

How are project classifications used in the capital budgeting process?

Q: Allied Food Products is considering expanding into the fruit juice business with

Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice product. Assume that you were recently hired as assistant to the director of capital budgeting...

Q: Kristin is evaluating a capital budgeting project that should last 4 years

Kristin is evaluating a capital budgeting project that should last 4 years. The project requires $800,000 of equipment. She is unsure what depreciation method to use in her analysis, straight-line or...

Q: You must evaluate a proposal to buy a new milling machine.

You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and...

Q: Explain why sunk costs should not be included in a capital budgeting

Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. Give an example of each.

Q: Explain why working capital is included in a capital budgeting analysis and

Explain why working capital is included in a capital budgeting analysis and how it is recovered at the end of a project’s life.

Q: Citrus Products Inc. is a medium-sized producer of citrus

Citrus Products Inc. is a medium-sized producer of citrus juice drinks with groves in Indian River County, Florida. Until now, the company has confined its operations and sales to the United States; b...

Q: Use the spreadsheet model to rework Parts a and b of Problem

Use the spreadsheet model to rework Parts a and b of Problem 20-8. Then answer the following question. c. Accepting that the corporate WACC should be used equally to discount all anticipated cash flow...

Q: As part of its overall plant modernization and cost reduction program,

As part of its overall plant modernization and cost reduction program, the management of Tanner-Woods Textile Mills has decided to install a new automated weaving loom. In the capital budgeting analys...

Q: Dan Barnes, financial manager of Ski Equipment Inc. (SKI

Dan Barnes, financial manager of Ski Equipment Inc. (SKI), is excited, but apprehensive. The company’s founder recently sold his 51% controlling block of stock to Kent Koren, who is...

Q: Why is the coefficient of variation a better risk measure to use

Why is the coefficient of variation a better risk measure to use than the standard deviation when evaluating the risk of capital budgeting projects?

Q: Explain how using a risk-adjusted discount rate improves capital budgeting

Explain how using a risk-adjusted discount rate improves capital budgeting decision making compared to using a single discount rate for all projects?

Q: How do we calculate the payback period for a proposed capital budgeting

How do we calculate the payback period for a proposed capital budgeting project? What are the main criticisms of the payback method?

Q: How and why does working capital affect the incremental cash flow estimation

How and why does working capital affect the incremental cash flow estimation for a proposed large capital budgeting project? Explain.

Q: How do opportunity costs affect the capital budgeting decision-making process

How do opportunity costs affect the capital budgeting decision-making process?

Q: Why is it important to have front-line managers participate in

Why is it important to have front-line managers participate in the budgeting process?

Q: The Gourmand Cooking School runs short cooking courses at its small campus

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the numbe...

Q: Alyeski Tours operates day tours of coastal glaciers in Alaska on its

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of p...

Q: Several years ago, Westmont Corporation developed a comprehensive budgeting system for

Several years ago, Westmont Corporation developed a comprehensive budgeting system for profit planning and control purposes. While departmental supervisors have been happy with the system, the factory...

Q: What is the major criticism of the payback and simple rate of

What is the major criticism of the payback and simple rate of return methods of making capital budgeting decisions?

Q: What is real option analysis? How is it a better method

What is real option analysis? How is it a better method of making investment decisions than using traditional capital budgeting analysis?

Q: Capital budgeting for a foreign project uses the same theoretical framework as

Capital budgeting for a foreign project uses the same theoretical framework as does domestic capital budgeting. What are the basic steps in domestic capital budgeting?

Q: Capital budgeting for a foreign project is considerably more complex than the

Capital budgeting for a foreign project is considerably more complex than the domestic case. What are the factors that add complexity?

Q: How is foreign exchange risk sensitivity factored into the capital budgeting analysis

How is foreign exchange risk sensitivity factored into the capital budgeting analysis of a foreign project?

Q: How is expropriation risk factored into the capital budgeting analysis of a

How is expropriation risk factored into the capital budgeting analysis of a foreign project?

Q: Chester’s Convenience Stores’ income statement for the year ended December 31,

Chester’s Convenience Stores’ income statement for the year ended December 31, 2011 and its balance sheet as of December 31, 2011 reported the following. The busi...

Q: Eddie’s Convenience Stores’ income statement for the year ended December 31,

Eddie’s Convenience Stores’ income statement for the year ended December 31, 2011 and its balance sheet as of December 31, 2011 reported the following. The business...

Q: Super Toys prepares budgets to help manage the company. Super Toys

Super Toys prepares budgets to help manage the company. Super Toys is budgeting for the fiscal year ended January 31, 2012. During the preceding year ended January 31, 2011, sales totaled $9,500 milli...

Q: Fun Toys prepares budgets to help manage the company. Fun Toys

Fun Toys prepares budgets to help manage the company. Fun Toys is budgeting for the fiscal year ended January 31, 2012. During the preceding year ended January 31, 2011, sales totaled $9,600 million a...

Q: Scrumptious Crumpets Bakery is budgeting cash for 2012. The cash balance

Scrumptious Crumpets Bakery is budgeting cash for 2012. The cash balance at December 31, 2011, was $14,000. Scrumptious Crumpets Bakery budgets 2012 cash receipts at $81,000. Estimated cash payments i...

Q: Nathan Farmer, chief financial officer of Bosworth Wireless, is responsible

Nathan Farmer, chief financial officer of Bosworth Wireless, is responsible for the company’s budgeting process. Farmer’s staff is preparing the Bosworth cash budge...

Q: David Doyle, chief financial officer of Madison Wireless, is responsible

David Doyle, chief financial officer of Madison Wireless, is responsible for the company’s budgeting process. Doyle’s staff is preparing the Madison cash budget for...

Q: Your company currently uses traditional capital budgeting techniques, including net present

Your company currently uses traditional capital budgeting techniques, including net present value. After hearing about the use of real option analysis, your boss decides that your company should use r...

Q: For a given IOS and MCC, how do financial managers decide

For a given IOS and MCC, how do financial managers decide which proposed capital budgeting projects to accept, and which to reject?

Q: Explain how to measure the firm risk of a capital budgeting project

Explain how to measure the firm risk of a capital budgeting project.

Q: Why do we focus on cash flows instead of profits when evaluating

Why do we focus on cash flows instead of profits when evaluating proposed capital budgeting projects?

Q: What is a sunk cost? Is it relevant when evaluating a

What is a sunk cost? Is it relevant when evaluating a proposed capital budgeting project? Explain.

Q: How do we estimate expected incremental cash flows for a proposed capital

How do we estimate expected incremental cash flows for a proposed capital budgeting project?

Q: How financing costs are generally incorporated into the capital budgeting analysis process

How financing costs are generally incorporated into the capital budgeting analysis process?

Q: What is the difference between capital budgeting screening decisions and capital budgeting

What is the difference between capital budgeting screening decisions and capital budgeting preference decisions?

Q: Why isn’t accounting net income used in the net present value and

Why isn’t accounting net income used in the net present value and internal rate of return methods of making capital budgeting decisions?

Q: Why are discounted cash flow methods of making capital budgeting decisions superior

Why are discounted cash flow methods of making capital budgeting decisions superior to other methods?

Q: Identify two simplifying assumptions associated with discounted cash flow methods of making

Identify two simplifying assumptions associated with discounted cash flow methods of making capital budgeting decisions.

Q: Midwest Water Works estimates that its WACC is 10.5%.

Midwest Water Works estimates that its WACC is 10.5%. The company is considering the following capital budgeting projects: Assume that each of these projects is just as risky as the firmâ€&...

Q: Why are interest charges not deducted when a project’s cash flows for

Why are interest charges not deducted when a project’s cash flows for use in a capital budgeting analysis are calculated?

Q: Suppose that your company used “APV,” or “All-

Suppose that your company used “APV,” or “All-the-Present Value-Except-CF0”, to analyze capital budgeting projects. What would this rule’s benchmark value be?

Q: Suppose a company wanted to double their firm’s value with the next

Suppose a company wanted to double their firm’s value with the next round of capital budgeting project decisions. To what would they set the PI benchmark to make this goal?

Q: Suppose your firm is considering investing in a project with the cash

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowa...

Q: The capital budgeting decision techniques that we’ve discussed all have strengths and

The capital budgeting decision techniques that we’ve discussed all have strengths and weaknesses, but they do comprise the most popular rules for valuing projects. Valuing entire bus...

Q: Give some examples of the financial complications that occur when evaluating a

Give some examples of the financial complications that occur when evaluating a capital budgeting project in a foreign country.

Q: Why would budgeting a fixed percentage of pretax profits for corporate philanthropy

Why would budgeting a fixed percentage of pretax profits for corporate philanthropy be seen as a more convincing commitment to CSR than just funding a variety of projects?

Q: General Electric Company’s worldwide performance evaluation system is based on a policy

General Electric Company’s worldwide performance evaluation system is based on a policy of decentralization. The policy reflects its conviction that managers will become more responsible and their bus...

Q: Foreign exchange rates are used to establish budgets and track actual performance

Foreign exchange rates are used to establish budgets and track actual performance. Of the various exchange rate combinations mentioned in this chapter, which do you favor? Why? Is your view the same w...

Q: A consultant commented that “too often the numbers look good but

A consultant commented that “too often the numbers look good but feel bad.” This commentoften stems from estimation error common to capital budgeting proposals that relate to future cash flows. Three...

Q: Capital budgeting is an important topic and there are Websites designed to

Capital budgeting is an important topic and there are Websites designed to helppeople understand the methods available. Access TeachMeFinance.com’s capital budgeting web page (teachm...

Q: Capital budgeting decisions require careful analysis because they are generally the ________

Capital budgeting decisions require careful analysis because they are generally the ________ ________ and ________ decisions that management faces.

Q: Identify four reasons that capital budgeting decisions by managers are risky.

Identify four reasons that capital budgeting decisions by managers are risky.

Q: Why should managers set the required rate of return higher than the

Why should managers set the required rate of return higher than the rate at which money can be borrowed when making a typical capital budgeting decision?

Q: Both the budget process and budgets themselves can impact management actions,

Both the budget process and budgets themselves can impact management actions, both positively and negatively. For instance, a common practice among not-for-profit organizations and government agencies...

Q: Your team is to prepare a budget report outlining the costs of

Your team is to prepare a budget report outlining the costs of attending college (full- time) forthe next two semesters (30 hours) or three quarters (45 hours). This budget’s focus is solely on atten...

Q: Freshiisells fresh foods with a focus on healthy fare. Company founder

Freshiisells fresh foods with a focus on healthy fare. Company founder Matthew Corrin stresses the importance of planning and budgeting for business success. Required1. How can budgeting help Matthe...

Q: Access KTM’s income statement (in Appendix A) for the business

Access KTM’s income statement (in Appendix A) for the business year 2011. Required1. Is KTM’s infrastructure and administration expense budget likely to be an important budget in its master budgetin...

Q: Would a manager of an Apple retail store participate more in budgeting

Would a manager of an Apple retail store participate more in budgeting than a manager at the corporate offices? Explain.

Q: Match the definitions 1 through 9 with the term or phrase a

Match the definitions 1 through 9 with the term or phrase a through i. A. Budget B. Merchandise purchases budget C. Cash budget D. Safety stock E. Budgeted income statement F. General and administrati...

Q: Participatory budgeting can sometimes lead to negative consequences. Identify three potential

Participatory budgeting can sometimes lead to negative consequences. Identify three potential negative outcomes that can arise from participatory budgeting.

Q: Identify at least three roles that budgeting plays in helping managers control

Identify at least three roles that budgeting plays in helping managers control and monitor a business.

Q: The motivation of employees is one goal of budgeting. Identify three

The motivation of employees is one goal of budgeting. Identify three guidelines that organizations should follow if budgeting is to serve effectively as a source of motivation for employees.

Q: How does budgeting help management coordinate and plan business activities?

How does budgeting help management coordinate and plan business activities?

Q: Good management includes good budgeting. (1) Explain why

Good management includes good budgeting. (1) Explain why the bottom-up approach to budgeting is considered a more successful management technique than a top-down approach. (2) Provide an example of...

Q: Activity-based budgeting is a budget system based on expected activities

Activity-based budgeting is a budget system based on expected activities. (1) Describe activity-based budgeting, and explain its preparation of budgets. (2) How does activity-based budgeting differ...

Q: Why is the sales budget so important to the budgeting process?

Why is the sales budget so important to the budgeting process?

Q: How would you incorporate political risk into the capital budgeting process of

How would you incorporate political risk into the capital budgeting process of foreign investment projects?

Q: The Alpha Company plans to establish a subsidiary in Hungary to manufactureand

The Alpha Company plans to establish a subsidiary in Hungary to manufactureand sell fashion wristwatches. Alpha has total assets of $70 million, of which$45 million is equity financed. The remainder i...

Q: Why is capital budgeting analysis so important to the firm?

Why is capital budgeting analysis so important to the firm?

Q: What is the intuition behind the NPV capital budgeting framework?

What is the intuition behind the NPV capital budgeting framework?

Q: Discuss the difference between performing the capital budgeting analysis from the parent

Discuss the difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the subsidiary’s perspective.

Q: What makes the APV capital budgeting framework useful for analyzing foreign capital

What makes the APV capital budgeting framework useful for analyzing foreign capital expenditures?

Q: What problems can enter into the capital budgeting analysis if project debt

What problems can enter into the capital budgeting analysis if project debt is evaluated instead of the borrowing capacity created by the project?

Q: Adrian and Pells (AP) is an advertising agency that uses

Adrian and Pells (AP) is an advertising agency that uses flexible budgeting for both planning and control. One of its clients, Troika Toys, asked AP to prepare an ad campaign for a new toy. APâ&...

Q: The Flower City Grocery is faced with the following capital budgeting decision

The Flower City Grocery is faced with the following capital budgeting decision. Its display freezer system must be repaired. The cost of this repair will be $1,000 and the system will be usable for an...

Q: Access.Com produces and sells software to libraries and schools to

Access.Com produces and sells software to libraries and schools to block access to Web sites deemed inappropriate by the customer. In addition, the software also tracks and reports on Web sites visite...

Q: Scion Corp. manufactures earth-moving equipment. Department A303 produces

Scion Corp. manufactures earth-moving equipment. Department A303 produces a number of small metal parts for the equipment, including specialized screw products, rods, frame fittings, and some engine p...

Q: I’ve given a good deal of thought to this issue of how

I’ve given a good deal of thought to this issue of how companies . . . go about negotiating objectives with their different business units. The typical process in such cases is that once the parent ne...

Q: Potter-Bowen (PB) manufactures and sells postage meters throughout

Potter-Bowen (PB) manufactures and sells postage meters throughout the world. Postage meters print the necessary postage on envelopes, eliminating the need to affix stamps. The meter keeps track of th...

Q: You are working in the office of the vice president of administration

You are working in the office of the vice president of administration at International Telecon (IT) as a senior financial planner. IT is a Fortune 500 firm with sales approaching $1 billion. IT provid...

Q: Adrian Power manufactures small power supplies for car stereos. The company

Adrian Power manufactures small power supplies for car stereos. The company uses flexible budgeting techniques to deal with the seasonal and cyclical nature of the business. The accounting department...

Q: Geico is considering expanding an existing plant on a piece of land

Geico is considering expanding an existing plant on a piece of land it already owns. The land was purchased 15 years ago for $325,000 and its current market appraisal is $820,000. A capital budgeting...

Q: Madden International is a large ($7 billion sales), successful international

Madden International is a large ($7 billion sales), successful international pharmaceuticals firm operating in 23 countries with 15 autonomous subsidiaries. The corporate office consists of five vice...

Q: Background Artisans Shirtcraft manufactures and sells hand-painted shirts of

Background Artisans Shirtcraft manufactures and sells hand-painted shirts of original design. The company was founded in 1999 by three sisters: Cathy, Linda, and Valerie Montgomery. Shirtcraft started...

Q: Golf World is a 1,000-room luxury resort with

Golf World is a 1,000-room luxury resort with swimming pools, tennis courts, three golf courses, and many other resort amenities. The head golf course superintendent, Sandy Green, is responsible for a...

Q: You work in the finance department of a telecommunications firm with a

You work in the finance department of a telecommunications firm with a large direct sales force selling high-speed fiber optics access lines to companies wanting telephone and Internet access. Your fi...

Q: Spectra Inc. produces color monitors for personal computers. The firm

Spectra Inc. produces color monitors for personal computers. The firm makes 19-inch monitors with the following cost structure: Direct materials ……â€...

Q: Panarude Airfreight is an international air freight hauler with more than 45

Panarude Airfreight is an international air freight hauler with more than 45 jet aircraft operating in the United States and the Pacific Rim. The firm is headquartered in Melbourne, Australia, and is...

Q: Discretionary costs are defined as “costs that (1) arise

Discretionary costs are defined as “costs that (1) arise from periodic (usually yearly) appropriation decisions regarding the maximum amounts to be incurred and (2) have no well-specified function rel...

Q: Vocabulary test. Explain the differences between: a. Real

Vocabulary test. Explain the differences between: a. Real and financial assets. b. Capital budgeting and financing decisions. c. Closely held and public corporations. d. Limited and unlimited liab...

Q: Aries Information Systems, Inc., develops and markets computer software specifically

Aries Information Systems, Inc., develops and markets computer software specifically designed to meet the financial accounting and reporting requirements of such public bodies as school districts and...

Q: What is a budget committee? What is the budget committee’s role

What is a budget committee? What is the budget committee’s role in the budgeting process?

Q: Describe the capital budgeting process in your own words.

Describe the capital budgeting process in your own words.

Q: Overview River Beverages is a food and soft drink company with

Overview River Beverages is a food and soft drink company with worldwide operations. The company is organized into five regional divisions with each vice president reporting directly to the CEO, Cindy...

Q: Hamilton Corp. manufactures a component used in a popular gaming console

Hamilton Corp. manufactures a component used in a popular gaming console. Demand has been strong and the executive staff at Hamilton is planning for next year. On October 1, they call you into a budge...

Q: What factors influence income? Why is an accurate estimate of expenses

What factors influence income? Why is an accurate estimate of expenses important in budget planning? How do tax laws affect the budgeting process?

Q: The purpose of this exercise is to introduce you to one of

The purpose of this exercise is to introduce you to one of the online tools that are available to help with budgeting and financial planning. Go to http://www.mint.com, and review the information avai...

Q: One of the basic functions of the budgeting process is a

One of the basic functions of the budgeting process is a. assigning decision rights. b. transferring information. c. evaluating managerial performance. d. implementing structural change.

Q: A city prepares its budget in traditional format, classifying expenditures by

A city prepares its budget in traditional format, classifying expenditures by fund and object. In 2010, amid considerable controversy, the city authorized the sale of $20 million in bonds to finance c...

Q: The following is a recommendation from Against the Grain, a series

The following is a recommendation from Against the Grain, a series of proposals by the State Comptroller of Texas on how the state could enhance revenues and decrease expenditures: Amend the Lottery...

Q: Henry Green is the assistant to a county’s comptroller. During the

Henry Green is the assistant to a county’s comptroller. During the year he becomes aware of several accounting and budgeting practices that, taken together, clearly establish a pattern that the county...

Q: How does participation in the budgeting process differ from consultation?

How does participation in the budgeting process differ from consultation?

Q: What are budgeting games, and why do employees engage in them

What are budgeting games, and why do employees engage in them?

Q: Manoil Electronics manufactures and sells electronic components to electronics stores. The

Manoil Electronics manufactures and sells electronic components to electronics stores. The controller is preparing her annual budget and has asked the sales group to prepare sales estimates. All membe...

Q: Megan Espanoza, manager of the Wells Division of Mars, Inc

Megan Espanoza, manager of the Wells Division of Mars, Inc., a large credit card company, recently received a memorandum describing the company’s new budgeting process for the coming year. The new pro...

Q: Budgeting allows an organization to identify potential problems so that plans can

Budgeting allows an organization to identify potential problems so that plans can be developed to avoid these problems or to deal with them systematically. Give an example of how budgeting might serve...

Q: Monthly cash budgets of inflows and outflows are an important part of

Monthly cash budgets of inflows and outflows are an important part of the budgeting process in most organizations. In the course of preparing a cash budget, the organization must estimate its cash inf...

Q: Sensitivity analysis is an important component of any budgeting exercise. Which

Sensitivity analysis is an important component of any budgeting exercise. Which estimates do you think will be most crucial in developing a master budget? Why?

Q: Many managers consider the pro forma financial statements to be the most

Many managers consider the pro forma financial statements to be the most important product of the master budgeting process. Why do you think they believe this?

Q: Borders Manufacturing is developing a sales and production plan as part of

Borders Manufacturing is developing a sales and production plan as part of its master budgeting process. Following are the projected monthly sales, which occur uniformly during each month, for the upc...

Q: What are some criticisms of the traditional budgeting model?

What are some criticisms of the traditional budgeting model?

Q: What are two fundamental ways in which the beyond budgeting approach differs

What are two fundamental ways in which the beyond budgeting approach differs from traditional budgeting?

Q: You are planning your expenditures for the upcoming school semester. You

You are planning your expenditures for the upcoming school semester. You assume that this year’s expenditures will equal last year’s plus 2%. What approach to budgeting are you using?

Q: You are willing to donate to worthy organizations. However, you

You are willing to donate to worthy organizations. However, you believe strongly that each request for a donation should be evaluated on the basis of its own merits. You would not feel bad in any year...

Q: Mark Newton has just opened a gourmet coffee bar, the first

Mark Newton has just opened a gourmet coffee bar, the first of its kind in Fountain, North Carolina. You are Mark’s accountant. On a recent visit to the store, you asked how the budget was coming alon...

Q: Preston Plastics is about to wrap up its capital budgeting cycle,

Preston Plastics is about to wrap up its capital budgeting cycle, and department managers across the company have submitted 500 capital project requests for consideration in the next round of funding....

Q: Preston Plastics is about to wrap up its capital budgeting cycle,

Preston Plastics is about to wrap up its capital budgeting cycle, and department managers across the company have submitted 500 capital project requests for consideration in the next round of funding....

Q: The Burnet County Road Authority was established as a separate government to

The Burnet County Road Authority was established as a separate government to maintain county highways. The road authority was granted statutory power to impose property taxes on county residents to co...

Q: The Chicago Youth Association (CYA) and the Palmer Athletic Club

The Chicago Youth Association (CYA) and the Palmer Athletic Club (PAC) are each considering purchasing a van. The CYA is a not‐for‐profit organization serving at‐risk inner‐city youth. It operates a c...

Q: LakeMaster Company manufactures outboard motors that are sold throughout the United States

LakeMaster Company manufactures outboard motors that are sold throughout the United States and Canada. The company uses a comprehensive budgeting process and compares actual results to budgeted amount...

Q: EduSoft Corporation’s president, Mark Fletcher, was looking forward to seeing

EduSoft Corporation’s president, Mark Fletcher, was looking forward to seeing the p erformance reports for October because he knew the company’s sales for the month...

Q: Give one example of a plausible activity base to use in flexible

Give one example of a plausible activity base to use in flexible budgeting for each of the following organizations: an insurance company, an express delivery service, a restaurant, and a state tax-col...

Q: RELY Cleaning Services, Inc., was started a number of years

RELY Cleaning Services, Inc., was started a number of years ago by Rick Ely to provide c leaning services to both large and small businesses in their home city. Over the years, as local businesses red...

Q: Three Rivers Dental Associates (TRDA) is a large dental practice

Three Rivers Dental Associates (TRDA) is a large dental practice in Pittsburgh. The firm’s controller is preparing the budget for the next year. The controller projects a total of 48,000 office visits...

Q: Eastern State University (ESU) is preparing its master budget for

Eastern State University (ESU) is preparing its master budget for the upcoming academic year. Currently, 12,000 students are enrolled on campus; however, the admissions office is forecasting a 5 perce...

Q: Continental Security Systems, Inc. (CSSI), manufactures and sells

Continental Security Systems, Inc. (CSSI), manufactures and sells security systems. The company started by installing photoelectric security systems in offices and has expanded into the private-home m...

Q: Fit-for-Life Foods Inc., a manufacturer of breakfast

Fit-for-Life Foods Inc., a manufacturer of breakfast cereals and snack bars, has experienced several years of steady growth in sales, profits, and dividends while maintaining a relatively low level of...

Q: What are the primary differences in budgeting between manufacturing and nonmanufacturing firms

What are the primary differences in budgeting between manufacturing and nonmanufacturing firms?

Q: How does activity-based budgeting explain the logic of budgeting?

How does activity-based budgeting explain the logic of budgeting?

Q: Discuss the importance of predictions and assumptions in the budgeting process.

Discuss the importance of predictions and assumptions in the budgeting process.

Q: Why is participative budgeting often an effective management tool?

Why is participative budgeting often an effective management tool?

Q: Hager’s Home Repair Company, a regional hardware chain that specializes in

Hager’s Home Repair Company, a regional hardware chain that specializes in “do it yourself” materials and equipment rentals, is cash rich because...

Q: Karen Johnson, CFO for Raucous Roasters (RR), a specialty

Karen Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her company’s working capital policy in light of a recent scare she faced when RRâ&...

Q: How does budgeting fit into your financial plan? How is your

How does budgeting fit into your financial plan? How is your financial plan affected by your spending? What is the budgeting trade-off?

Q: With your help, Dave and Sharon Sampson have now established a

With your help, Dave and Sharon Sampson have now established a financial plan. Among their key financial planning decisions were the following: • Budgeting. They decided to revise their budget to mak...

Q: Annual reports provide significant information about an organization’s capital budget and capital

Annual reports provide significant information about an organization’s capital budget and capital budgeting process. Intel Corporation provides financial reports for several years at www.intel.com (Ab...

Q: The Office of Management and Budget provides access to the budget of

The Office of Management and Budget provides access to the budget of the United States government at its Web site: www.gpoaccess.gov/usbudget/citizensguide.html. “A Citizen’s Guide to the Federal Budg...

Q: One of the significant costs for a nonpublic college or university is

One of the significant costs for a nonpublic college or university is student aid in the form of gifts and grants awarded to students because of academic potential or performance, and/or financial nee...

Q: Capital budgeting analysis involves the use of many estimates.

Capital budgeting analysis involves the use of many estimates. Required: For each of the following estimation errors, state whether the net present value of the project will be too high or too low: a...

Q: National Leasing is evaluating the cost of capital to use in its

National Leasing is evaluating the cost of capital to use in its capital budgeting process. Over the recent past, the company has averaged a return on equity of 12% and a return on investment of 9%. T...

Q: A task force of capital budgeting analysts at Seger Ltd. collected

A task force of capital budgeting analysts at Seger Ltd. collected the following data concerning the drilling and production of known petroleum reserves at an offshore location: Investment in rigging...

Q: Jenna Suarez, the controller for Arben Company, has faced the

Jenna Suarez, the controller for Arben Company, has faced the following situations in the past two weeks: a. Ben Heald, head of production, wondered whether it would be more cost effective to buy part...

Q: Distinguish between the following two types of capital budgeting decisions: acceptance

Distinguish between the following two types of capital budgeting decisions: acceptance-or-rejection decisions and capital-rationing decisions.

Q: How do computerized budgeting systems aid firms in the budgeting process?

How do computerized budgeting systems aid firms in the budgeting process?

Q: The city of Milton has an annual budget cycle that begins on

The city of Milton has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each depart- ment. Th...

Q: Children’s Hospital of the King’s Daughters Health System in Norfolk, Virginia

Children’s Hospital of the King’s Daughters Health System in Norfolk, Virginia, introduced a new budgeting method that allowed the hospital’s annual plan to be updated for changes in operating plans....

Q: Mutually exclusive capital budgeting projects are those that a.

Mutually exclusive capital budgeting projects are those that a. if accepted or rejected do not affect the cash flows of other projects. b. if accepted will produce a negative NPV. c. if rejected prec...

Q: Which of the following is not true regarding the IRR?

Which of the following is not true regarding the IRR? a. The IRR is the interest rate that sets the present value of a project’s cash inflows equal to the present value of the project’s cost. b. The...

Q: A manager decided to acquire some expensive equipment through the use of

A manager decided to acquire some expensive equipment through the use of an operating lease even though a capital budgeting analysis showed that it was more profitable to buy than to lease. However, t...

Q: Kildare Medical Center, a for-profit hospital, has three

Kildare Medical Center, a for-profit hospital, has three investment opportunities: (1) adding a wing for in-patient treatment of substance abuse, (2) adding a pathology laboratory, and (3) expanding t...

Q: Shelley Couts, the owner of Conch Republic Electronics, had received

Shelley Couts, the owner of Conch Republic Electronics, had received the capital budgeting analysis from Jay McCanless for the new PDA the company is considering. Shelley was pleased with the results,...

Q: Explain why interest expense is not treated as a cash outflow in

Explain why interest expense is not treated as a cash outflow in capital budgeting decisions made using net present value (NPV) analysis.

Q: Why is it important to take into account the time value of

Why is it important to take into account the time value of money when making capital budgeting decisions?

Q: What are the four elements of the budgeting cycle?

What are the four elements of the budgeting cycle?

Q: What are some additional considerations that arise when budgeting in multinational companies

What are some additional considerations that arise when budgeting in multinational companies?

Q: For each of the following items, identify which of the management

For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purpos...

Q: Band Box Entertainment (BBE) operates a large store in Atlanta

Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from t...

Q: George Jimenez is the controller at Balkin Electronics, a manufacturer of

George Jimenez is the controller at Balkin Electronics, a manufacturer of devices for the computer industry. The company may promote him to chief financial officer. Required: 1. In this table, indica...

Q: What is the major criticism of the payback and simple rate of

What is the major criticism of the payback and simple rate of return methods of making capital budgeting decisions?

Q: What is the difference between capital budgeting screening decisions and capital budgeting

What is the difference between capital budgeting screening decisions and capital budgeting preference decisions?

Q: Why isn’t accounting net income used in the net present value method

Why isn’t accounting net income used in the net present value method of making capital budgeting decisions?

Q: Why are discounted cash flow methods of making capital budgeting decisions superior

Why are discounted cash flow methods of making capital budgeting decisions superior to other methods?

Q: Identify two simplifying assumptions associated with discounted cash flow methods of making

Identify two simplifying assumptions associated with discounted cash flow methods of making capital budgeting decisions.

Q: Stillwater Designs is considering a new Kicker speaker model: Solo X18

Stillwater Designs is considering a new Kicker speaker model: Solo X18, which is a large and expensive subwoofer (projected price is $760 to distributors). The company controls the design specificatio...

Q: The percentage of accounts receivable that are uncollectible can be ignored for

The percentage of accounts receivable that are uncollectible can be ignored for cash budgeting because a. no cash is received from an account that defaults. b. it is included in cash sales. c. it app...

Q: Activity flexible budgeting makes it possible to a. predict

Activity flexible budgeting makes it possible to a. predict what activity costs will be as activity output changes. b. improve traditional budgetary performance reporting. c. enhance the ability to m...

Q: Harry Johnson, the chief financial officer of Ur Thrift Inc,

Harry Johnson, the chief financial officer of Ur Thrift Inc, a large retailer, had just finished a meeting with the Roger Swasey, the chief financial officer of the large retailer, and Connie Baker, i...

Q: Alger Inc. manufactures six models of leaf blowers and weed eaters

Alger Inc. manufactures six models of leaf blowers and weed eaters. Alger’s budgeting team is finalizing the sales budget for the coming year. Sales in units and dollars for last yea...

Q: You own a small boat manufacturing company. At a recent manufacturers’

You own a small boat manufacturing company. At a recent manufacturers’ association meeting, you overheard one of the other company owners say that he liked using a continuous budgeting process. Discus...

Q: High-level executives have often indicated that competitors’ actions are the

High-level executives have often indicated that competitors’ actions are the top external factor affecting their businesses and their business plans. a. Why are competitors’ actions so important to bu...

Q: Find the Web page for a charitable organization that operates internationally as

Find the Web page for a charitable organization that operates internationally as well as domestically. a. Prepare a list of activities in which this organization is currently involved. b. What would b...

Q: Norton Weymer & Collins, LLP, a local accounting firm,

Norton Weymer & Collins, LLP, a local accounting firm, has a formal budgeting system. The firm has five partners, two managers, four seniors, two secretaries, and two bookkeepers. The budgeting proces...

Q: Cute and Cuddly Inc. sells teddy bears in walk-by

Cute and Cuddly Inc. sells teddy bears in walk-by kiosks in shopping malls. The company’s balance sheet on March 31, 2010, showed the following balances related to Accounts Receivable and inventories:...

Q: UpTop Mining has compiled the following data to analyze utility costs:

UpTop Mining has compiled the following data to analyze utility costs: Use the least squares method to develop a formula for budgeting utility cost.

Q: Blackman Corp., a rapidly expanding crossbow distributor, is in the

Blackman Corp., a rapidly expanding crossbow distributor, is in the process of formulating plans for 2011. Cara Jordan, director of marketing, has completed her 2011 forecast and is confident that sal...

Q: Why is continuous (rolling) budgeting becoming more popular than it

Why is continuous (rolling) budgeting becoming more popular than it was in the past for organizational managers?

Q: If the majority of companies find that their forecasts are inaccurate,

If the majority of companies find that their forecasts are inaccurate, why should managers engage in budgeting at all?

Q: How does budgeting provide important information to managers and operating personnel?

How does budgeting provide important information to managers and operating personnel?

Q: The chapter showed how analyzing a box spread is like a capital

The chapter showed how analyzing a box spread is like a capital budgeting problem using the NPV approach. Consider the internal rate of return method of examining capital budgeting problems and analyz...

Q: The following terms pertain to the budgeting process: Benchmarks

The following terms pertain to the budgeting process: Benchmarks Budget Control Motivation Responsibility accounting Bottlenecks Budget committee Imposed from above Planning Self-imposed budget Requi...

Q: Gig Harbor Boating is the wholesale distributor of a small recreational catamaran

Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process: Budgeted unit sa...

Q: Describe the flow of budget data in an organization. Who are

Describe the flow of budget data in an organization. Who are the participants in the budgeting process, and how do they participate?

Q: Norton Company, a manufacturer of infant furniture and carriages, is

Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages of preparing the annual budget for next year. Scott Ford has recently joined Norton’s accounting staff and is...

Q: Roller, Ltd., of Melbourne, Australia, is the exclusive

Roller, Ltd., of Melbourne, Australia, is the exclusive distributor in Australia and the South Pacific of a popular brand of in-line skates manufactured in Mexico. The company is in the process of put...

Q: You have just been hired as a new management trainee by Earrings

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company h...

Q: The questions in this exercise give you an appreciation for the complexity

The questions in this exercise give you an appreciation for the complexity of budgeting in a large multinational corporation. To answer the questions, you will need to download the Procter & Gamble (P...

Q: How can budgeting assist a company in planning its workforce staffing levels

How can budgeting assist a company in planning its workforce staffing levels?

Q: At any one time, should the same WACC be used to

At any one time, should the same WACC be used to evaluate each of a company’s capital budgeting projects? If not, how should the WACC be adjusted for the different projects?

Q: If the company’s capital budgeting analyst decided to show all projected cash

If the company’s capital budgeting analyst decided to show all projected cash flows, both positive and negative, in current dollars rather than inflation-adjusted dollars, would this affect the calcul...

Q: Option values are extinguished when they are exercised. How does this

Option values are extinguished when they are exercised. How does this influence capital budgeting decisions? What considerations, or types of analysis, might lead management to “take the plunge” and p...

Q: Suppose a company uses the NPV method, along with risk-

Suppose a company uses the NPV method, along with risk-adjusted WACCs, to calculate project NPVs. However, it has not been considering real options in its capital budgeting decisions. Now suppose the...

Q: Explain why sunk costs should not be included in a capital budgeting

Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included.

Q: Describe the six primary capital budgeting decision criteria. What are their

Describe the six primary capital budgeting decision criteria. What are their pros and cons, and how are they related to maximizing shareholder wealth? Should managers use just one criterion, or are th...

Q: Explain how net operating working capital is recovered at the end of

Explain how net operating working capital is recovered at the end of a project’s life and why it is included in a capital budgeting analysis.

Q: What types of projects require the least detailed and the most detailed

What types of projects require the least detailed and the most detailed analysis in the capital budgeting process?

Q: Why are interest charges not deducted when a project’s cash flows are

Why are interest charges not deducted when a project’s cash flows are calculated for use in a capital budgeting analysis?

Q: You have just graduated from the MBA program of a large university

You have just graduated from the MBA program of a large university, and one of your favorite courses was “Today’s Entrepreneurs.” In fact, you enj...

Q: Shrieves Casting Company is considering adding a new line to its product

Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line wou...

Q: The Ulmer Uranium Company is deciding whether or not to open a

The Ulmer Uranium Company is deciding whether or not to open a strip mine whose net cost is $4.4 million. Net cash inflows are expected to be $27.7 million, all coming at the end of Year 1. The land m...

Q: Hale Specialties manufactures, among other things, woolen blankets for the

Hale Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased fr...

Q: Apex Chemical Company currently operates three manufacturing plants in Colorado, Utah

Apex Chemical Company currently operates three manufacturing plants in Colorado, Utah, and Arizona. Annual carbon emissions for these plants in the first quarter of 2018 are 125,000 metric tons per qu...

Q: Bill Watts, president of Western Publications, accepts a capital budgeting

Bill Watts, president of Western Publications, accepts a capital budgeting project proposed by division X. This is the division in which the president spent his first 10 years with the company. On the...

Q: How can capital budgeting tools assist in evaluating a manager who is

How can capital budgeting tools assist in evaluating a manager who is responsible for retaining customers of a cellular telephone company?

Q: “Only quantitative outcomes are relevant in capital budgeting analyses.” Do

“Only quantitative outcomes are relevant in capital budgeting analyses.” Do you agree? Explain.

Q: Wayne Mueller, financial analyst at CELL Corporation, is examining the

Wayne Mueller, financial analyst at CELL Corporation, is examining the behavior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours worked and utili...

Q: “Capital budgeting has the same focus as accrual accounting.” Do

“Capital budgeting has the same focus as accrual accounting.” Do you agree? Explain.

Q: The Jerico store of Jiffy Mart, a chain of small neighborhood

The Jerico store of Jiffy Mart, a chain of small neighborhood convenience stores, is preparing its activity-based budget for January 2018. Jiffy Mart has three product categories: soft drinks (35% of...

Q: Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting

Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2018. Each successive month, the budgeted cost-driver rate decreases by 0.4% relative to...

Q: The accounting department at Kerrville College has decided to offer a three

The accounting department at Kerrville College has decided to offer a three-day ethics workshop for local CPAs in March 2010. Rose Morris, a tenured professor, will supervise the seminarâ€&...

Q: How is risk defined in capital budgeting analysis? List several aspects

How is risk defined in capital budgeting analysis? List several aspects of a project in which risk is involved and how risk can affect a project’s net present value.

Q: Why do capital budgeting evaluation methods use cash flows rather than accounting

Why do capital budgeting evaluation methods use cash flows rather than accounting income?

Q: Will the NPV amount determined in the capital budgeting process be the

Will the NPV amount determined in the capital budgeting process be the same amount as that which actually occurs after a project is undertaken? Why or why not?

Q: Because depreciation is not a cash flow, why is it important

Because depreciation is not a cash flow, why is it important in capital budgeting evaluation techniques that use discounted cash flows?

Q: In discussing your cost accounting class with friends, you explained that

In discussing your cost accounting class with friends, you explained that you were currently studying methods of evaluating capital investments. You mentioned that most of these methods rely upon cash...

Q: Choose letter C (for committed cost) or D (for

Choose letter C (for committed cost) or D (for discretionary cost) to indicate the type of each of the following described costs. Explain the rationale for your choice. a. Control is first provided du...

Q: After reviewing financial results for 2010, Chicago Cannery’s president sent the

After reviewing financial results for 2010, Chicago Cannery’s president sent the following e-mail to his CFO and controller, Willie Logan. Dear Willie: I’m disappointed in the financial results for th...

Q: Omaha Metal Products manufactures a variety of industrial products from stock metal

Omaha Metal Products manufactures a variety of industrial products from stock metal components. The firm is engaged in its annual process of budgeting costs and revenues for the coming year. The cost...

Q: Managers at some companies face an ongoing systems development crisis: IS

Managers at some companies face an ongoing systems development crisis: IS departments develop systems that businesses cannot or will not use. At the heart of the problem is a “great divide” that separ...

Q: The Charlotte Bobcats, a professional basketball team, has been offered

The Charlotte Bobcats, a professional basketball team, has been offered the opportunity to purchase the contract of an aging superstar basketball player from another team. The general manager of the B...

Q: America Cola is considering the purchase of a special-purpose bottling

America Cola is considering the purchase of a special-purpose bottling machine for $65,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates...

Q: Andrews Construction is analyzing its capital expenditure proposals for the purchase of

Andrews Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Bart, staff analyst...

Q: Walker Inc. is considering the purchase of new equipment that will

Walker Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Walker made the following estimates related to the new machinery: Cost of the equipm...

Q: Spirit Freightways is a leader in transporting agricultural products in the western

Spirit Freightways is a leader in transporting agricultural products in the western provinces of Canada. Reese Brown, a financial analyst at Spirit Freightways, is studying the behavior of transportat...

Q: Flextron Company is a contract manufacturer for a variety of pharmaceutical and

Flextron Company is a contract manufacturer for a variety of pharmaceutical and over-the-counter products. It has a reputation for operational excellence and boasts a normal spoilage rate of 2% of nor...

Q: Johnny Buster owns Entertainment World, a place that combines fast food

Johnny Buster owns Entertainment World, a place that combines fast food, innovative beverages, and arcade games. Worried about the shifting tastes of younger audiences, Johnny contemplates bringing in...

Q: Level 3 Communications, LLC, provides integrated telecommunications services including voice

Level 3 Communications, LLC, provides integrated telecommunications services including voice, Internet access, and data transmission using rapidly improving optical and Internet protocol technologies...

Q: “The decision to start your own firm and go into business

“The decision to start your own firm and go into business can be thought of as a capital budgeting decision. You only go ahead if projected returns look attractive on a personal and financial basis.”...

Q: What major steps are involved in the capital budgeting process?

What major steps are involved in the capital budgeting process?

Q: Level 3 Communications, Inc., like many emerging telecom carriers,

Level 3 Communications, Inc., like many emerging telecom carriers, has only limited and infrequent access to domestic debt and equity markets. Explain the attractiveness of a “benefit-cost ratio” appr...

Q: How is a crossover discount rate calculated, and how does it

How is a crossover discount rate calculated, and how does it affect capital budgeting decisions?

Q: The benefit-cost approach first surfaced in France during 1844.

The benefit-cost approach first surfaced in France during 1844. In this century, benefit-cost analysis has been widely used in the evaluation of river and harbor projects since as early as 1902. In th...

Q: Toby Amberville’s Manhattan Café, Inc., is considering investment in two

Toby Amberville’s Manhattan Café, Inc., is considering investment in two alternative capital budgeting projects. Project A is an investment of $75,000 to replace working but obsolete refrigeration equ...

Q: Teresa Flanagan, the accountant, is a perfectionist. No one

Teresa Flanagan, the accountant, is a perfectionist. No one can do the job as well as she can. Indeed, she has found budget information provided by the various departments to be worthless. She must ch...

Q: Amherst Corporation has three divisions, each operating as a responsibility center

Amherst Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to...

Q: Webb Publishing Company is evaluating two investment opportunities. One is to

Webb Publishing Company is evaluating two investment opportunities. One is to purchase an Internet company with the capacity to open new marketing channels through which Webb can sell its books. This...

Q: The Curious Accountant in this chapter discussed some of the budgeting issues

The Curious Accountant in this chapter discussed some of the budgeting issues facing the United States Olympic Committee (USOC). First, to get a basic understanding of the sources of revenues and expe...

Q: Clarence Cleaver is the budget director for the Harris County School District

Clarence Cleaver is the budget director for the Harris County School District. Mr. Cleaver recently sent an urgent e-mail message to Sally Simmons, principal of West Harris County High. The message se...

Q: Maria Gutierrez and Devin Duzan recently graduated from the same university.

Maria Gutierrez and Devin Duzan recently graduated from the same university. After graduation they decided not to seek jobs at established organizations but, rather, to start their own small business...

Q: Barbara Harvey is angry with Martin Cochran. He is behind schedule

Barbara Harvey is angry with Martin Cochran. He is behind schedule developing supporting material for tomorrow’s capital budget committee meeting. When she approached him about his apparent lackadaisi...

Q: Why are the affordable and arbitrary allocation budgeting methods considered to be

Why are the affordable and arbitrary allocation budgeting methods considered to be very poor budgeting methods?

Q: Choose the best answer. 1. Which of the following

Choose the best answer. 1. Which of the following would not be considered a general long-term liability? a. T he estimated liability to clean up the hazardous waste storage sites of the cityâ
...

Q: The following information is provided about the Town of York’s General Fund

The following information is provided about the Town of York’s General Fund operating statement and budgetary accounts for the fiscal year ended September 30, 2016. (Note: The town has no restricted,...

Q: Children’s Hospital of the King’s Daughters Health System in Norfolk, Virginia

Children’s Hospital of the King’s Daughters Health System in Norfolk, Virginia, introduced a new budgeting method that allowed the hospital’s annual plan to be updated for changes in actual operations...

Q: In one group, find a local business, such as a

In one group, find a local business, such as a copy shop, that charges for printing, faxing, copying, and scanning documents. In the other group, determine the price of a mid-range printer/copier/scann...

Q: Why does traditional NPV analysis tend to underestimate the true value of

Why does traditional NPV analysis tend to underestimate the true value of a capital budgeting project?

Q: Are the capital budgeting criteria we discussed applicable to not-for

Are the capital budgeting criteria we discussed applicable to not-for-profit corporations? How should such entities make capital budgeting decisions? What about the U.S. government? Should it evaluate...

Q: Your company currently uses traditional capital budgeting techniques, including net present

Your company currently uses traditional capital budgeting techniques, including net present value. After hearing about the use of real option analysis, your boss decides that your company should use r...

Q: You are discussing a project analysis with a coworker. The project

You are discussing a project analysis with a coworker. The project involves real options, such as expanding the project if successful, or abandoning the project if it fails. Your coworker makes the fo...

Q: In our capital budgeting examples, we assumed that a firm would

In our capital budgeting examples, we assumed that a firm would recover all of the working capital it invested in a project. Is this a reasonable assumption? When might it not be valid?

Q: Examine the following tables from the Financial Trend Monitoring Report for the

Examine the following tables from the Financial Trend Monitoring Report for the Town of Oakdale that reports on fiscal year 2017. The performance indicators selected are total revenue and revenue pe...

Q: Choose the best answer. 1. Budgets of government entities

Choose the best answer. 1. Budgets of government entities: a. Are integrated with the financial accounting system. b. Enable governments to demonstrate compliance with laws and to communicate performa...

Q: The police chief of the Town of Meridian submitted the following budget

The police chief of the Town of Meridian submitted the following budget request for the police department for the forthcoming budget year 2017–18. Upon questioning by the newly a...

Q: The City of Fort Collins, Colorado, has adopted the budgeting

The City of Fort Collins, Colorado, has adopted the budgeting for outcomes entrepreneurial budgeting method as a basis for its budgeting process. Required: Locate the city’s most recent budget materi...

Q: What is the difference between two types of line-item budgeting

What is the difference between two types of line-item budgeting approaches— incremental budgeting and zero-based budgeting?

Q: 1. Under these circumstances, would Justin be wise to pursue

1. Under these circumstances, would Justin be wise to pursue a top-down or a bottom-up budgeting approach? 2. Why? What factors are most relevant?

Q: Contrast the disadvantages of top-down budgeting and bottom-up

Contrast the disadvantages of top-down budgeting and bottom-up budgeting.

Q: The chapter describes the problems of budgeting projects with S-shaped

The chapter describes the problems of budgeting projects with S-shaped and J-shaped life cycle curves. What might be the budget problems if the life cycle of a project was just a straight diagonal lin...

Q: If a firm uses program budgeting for its projects, is an

If a firm uses program budgeting for its projects, is an activity budget not needed? If it is, then of what value is the program budget?

Q: Daves Convenience Stores income statement and balance sheet reported the following.

Daves Convenience Stores income statement and balance sheet reported the following. The business is organized as a proprietorship, so it pays no corporate income tax. The owner is budgeting for 2010....

Q: John Watson, chief financial officer of Jasper Wireless, is responsible

John Watson, chief financial officer of Jasper Wireless, is responsible for the companys budgeting process. Watsons staff is preparing the Jasper cash budget for 2011. A key input to the budgeting pro...

Q: Don Beecher, chief financial officer of Carvel Wireless, is responsible

Don Beecher, chief financial officer of Carvel Wireless, is responsible for the companys budgeting process. Beechers staff is preparing the Carvel cash budget for 2011. A key input to the budgeting pr...

Q: Maroneys Convenience Stores income statement and balance sheet reported the following.

Maroneys Convenience Stores income statement and balance sheet reported the following. The business is organized as a proprietorship, so it pays no corporate income tax. The owner is budgeting for 2...

Q: The Little French Bakery is budgeting cash for 2011. The cash

The Little French Bakery is budgeting cash for 2011. The cash balance at December 31, 2010, was $6,000. The Little French Bakery budgets 2011 cash receipts at $83,000. Estimated cash payments include...

Q: Toys Plus prepares budgets to help manage the company. Toys Plus

Toys Plus prepares budgets to help manage the company. Toys Plus is budgeting for the fiscal year ended January 31, 2010. During the preceding year ended January 31, 2009, sales totaled $9,300 million...

Q: Toyland prepares budgets to help manage the company. Toyland is budgeting

Toyland prepares budgets to help manage the company. Toyland is budgeting for the fiscal year ended January 31, 2010. During preceding year ended January 31, 2009, sales totaled $9,700 million and cos...

Q: Wendell’s Donut Shoppe is investigating the purchase of a new $18

Wendell’s Donut Shoppe is investigating the purchase of a new $18,600 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at...

Q: Derrick Iverson is a divisional manager for Holston Company. His annual

Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each...

Q: Springfield Corporation operates on a calendar-year basis. It begins

Springfield Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August, when the president establishes targets for total sales dollars and net operating incom...

Q: Casey Nelson is a divisional manager for Pigeon Company. His annual

Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of t...

Q: Adger Corporation is a service company that measures its output based on

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting...

Q: Gaston Company is considering a capital budgeting project that would require a

Gaston Company is considering a capital budgeting project that would require a $2,000,000 investment in equipment with a useful life of five years and no salvage value. The company’s...

Q: Lander Company has an opportunity to pursue a capital budgeting project with

Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: Cost of...

Q: Rosman Company has an opportunity to pursue a capital budgeting project with

Rosman Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Rosman estimated the following costs and revenues for the project: Cost of...

Q: Wheeling Company is a merchandiser that provided a balance sheet as of

Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling Company Balance Sheet September 30 Assets Cash...............................................

Q: Many accounting professionals work in one of the following three areas:

Many accounting professionals work in one of the following three areas: A. Financial accounting B. Managerial accounting C. Tax accounting Identify the area of accounting that is most involved in each...

Q: You have recently been hired by Swan Motors, Inc. (

You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Joe Swan. Joe found a method to manufacture a cheaper batt...

Q: You have run a regression of monthly returns on Amgen, a

You have run a regression of monthly returns on Amgen, a large biotechnology firm, against monthly returns on the S&P 500 Index, and come up with the following output: The current one-year Treasur...

Q: You have been hired as a capital budgeting analyst by a sporting

You have been hired as a capital budgeting analyst by a sporting goods firm that manufactures athletic shoes and has captured 10% of the overall shoe market (the total market is worth $100 million a y...

Q: Both the budget process and budgets themselves can impact management actions,

Both the budget process and budgets themselves can impact management actions, both positively and negatively. For instance, a common practice among not-for-profit organizations and government agencies...

Q: Your team is to prepare a budget report outlining the costs of

Your team is to prepare a budget report outlining the costs of attending college (full-time) for the next two semesters (30 hours) or three quarters (45 hours). This budget’s focus is solely on attend...

Q: Solben sells technology to use in the production of biodiesel. Company

Solben sells technology to use in the production of biodiesel. Company founder Daniel Gómez Iñiguez stresses the importance of planning and budgeting for business success. Required 1. How can budgeti...

Q: Access Samsung’s income statement (in Appendix A) for the business

Access Samsung’s income statement (in Appendix A) for the business year 2013. Required 1. Is Samsung’s selling and administrative expenses budget likely to be an important budget in its master budget...

Q: A consultant commented that “too often the numbers look good but

A consultant commented that “too often the numbers look good but feel bad.” This comment often stems from estimation error common to capital budgeting proposals that relate to future cash flows. Three...

Q: Participatory budgeting can sometimes lead to negative consequences. From the following

Participatory budgeting can sometimes lead to negative consequences. From the following list of outcomes that can arise from participatory budgeting, identify those with potentially negative consequen...

Q: Match the definitions 1 through 9 with the term or phrase a

Match the definitions 1 through 9 with the term or phrase a through i. A. Budget B. Merchandise purchases budget C. Cash budget D. Safety stock E. Budgeted income statement F. General and administrati...

Q: The primary purpose of managerial accounting is to provide information useful for

The primary purpose of managerial accounting is to provide information useful for management decisions. Many of the managerial accounting techniques that you learn in this section of the course will b...

Q: In what ways can the budgeting process create incentives for unethical behavior

In what ways can the budgeting process create incentives for unethical behavior?

Q: Capital budgeting decisions require careful analysis because they are generally the and

Capital budgeting decisions require careful analysis because they are generally the and decisions that management faces.

Q: Would a manager of an Apple retail store participate more in budgeting

Would a manager of an Apple retail store participate more in budgeting than a manager at the corporate offices? Explain.

Q: Identify four reasons that capital budgeting decisions by managers are risky.

Identify four reasons that capital budgeting decisions by managers are risky.

Q: The motivation of employees is one goal of budgeting. Identify three

The motivation of employees is one goal of budgeting. Identify three guidelines that organizations should follow if budgeting is to serve effectively as a source of motivation for employees.

Q: Good management includes good budgeting. (1) Explain why

Good management includes good budgeting. (1) Explain why the bottom-up approach to budgeting is considered a more successful management technique than a top-down approach.

Q: Activity-based budgeting is a budget system based on expected activities

Activity-based budgeting is a budget system based on expected activities. (1) Describe activity-based budgeting, and explain its preparation of budgets. (2) How does activity-based budgeting differ...

Q: Perdon Corporation manufactures safes—large mobile safes, and large walk

Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of i...

Q: The controller of Trenshaw Company wants to improve the company’s control system

The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2014. June 30, 2...

Q: Green Landscaping Inc. is preparing its budget for the first quarter

Green Landscaping Inc. is preparing its budget for the first quarter of 2014. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end th...

Q: Kitchen Help Inc. (KHI) is a manufacturer of toaster

Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current...

Q: Palmer Corporation operates on a calendar-year basis. It begins

Palmer Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August when the president establishes targets for the total dollar sales and net income before taxe...

Q: Network Computing Devices, Inc. was founded in 1988 in Mountain

Network Computing Devices, Inc. was founded in 1988 in Mountain View, California. The company develops software products such as X-terminals, Z-mail, PC X-ware, and related hardware products. The foll...

Q: Information regarding many approaches to budgeting can be found on the Web

Information regarding many approaches to budgeting can be found on the Web. The following activity investigates the merits of “zero-based” budgeting, as discussed by Michael LaFaive, Director of Finan...

Q: Computer Associates International, Inc., the world’s leading business software company

Computer Associates International, Inc., the world’s leading business software company, delivers the end-to-end infrastructure to enable e-business through innovative technology, services, and educati...

Q: There are many useful resources regarding budgeting available on websites. The

There are many useful resources regarding budgeting available on websites. The following activity investigates the results of a comprehensive budgeting study. Address: http://www.accountingweb.com/whi...

Q: Krause Industries’ balance sheet at December 31, 2013, is presented

Krause Industries’ balance sheet at December 31, 2013, is presented below. Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 20...

Q: What are some examples of potential intangible benefits of investment proposals?

What are some examples of potential intangible benefits of investment proposals? Why do these intangible benefits complicate the capital budgeting evaluation process? What might happen if intangible b...

Q: Lori Wilkins maintains that the only difference between budgeting and long-

Lori Wilkins maintains that the only difference between budgeting and long-range planning is time. Do you agree? Why or why not?

Q: Compare and contrast NPV and IRR as capital budgeting techniques.

Compare and contrast NPV and IRR as capital budgeting techniques.

Q: Consider the issues of project budget, scope, and project timetable

Consider the issues of project budget, scope, and project timetable. Discuss the extent to which the City Center project reflects survey evidence discussed in the chapter about capital budgeting biase...

Q: Why is capital budgeting such an important process? Why are capital

Why is capital budgeting such an important process? Why are capital budgeting errors so costly?

Q: What are the disadvantages of using the payback period as a capital

What are the disadvantages of using the payback period as a capital- budgeting technique? What are its advantages? Why is it so frequently used?

Q: The percentage of accounts receivable that is uncollectible can be ignored for

The percentage of accounts receivable that is uncollectible can be ignored for cash budgeting because a. no cash is received from an account that defaults. b. it is included in cash sales. c. it appea...

Q: Allison Manufacturing produces a subassembly used in the production of jet aircraft

Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units...

Q: Peninsula Candy Company makes three types of candy bars: Chewy,

Peninsula Candy Company makes three types of candy bars: Chewy, Chunky, and Choco-Lite (Lite). Sales volume for the annual budget is determined by estimating the total market volume for candy bars and...

Q: Circle the letter before the most accurate answer. 6.

Circle the letter before the most accurate answer. 6. A budgeting approach in which every expense in every budget must be justified is referred to as __________ budgeting. a. zero-base b. financial-ba...

Q: Allison Manufacturing produces a subassembly used in the production of

Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units...

Q: The following data have been collected by capital budgeting analysts

The following data have been collected by capital budgeting analysts at Sunrise Beach, Inc., concerning an investment in an expansion of the company’s product line. Analysts estimate that an investmen...

Q: Two products are manufactured by the Fraser Corporation: Widgets and Thingamajigs

Two products are manufactured by the Fraser Corporation: Widgets and Thingamajigs. In July 2015, the controller of Fraser, upon instructions from senior management, had the budgeting department gather...

Q: Home Entertainment Centre (HEC) operates a large store in Halifax

Home Entertainment Centre (HEC) operates a large store in Halifax. The store has both a DVD section and a music section (compact discs, MP3 players, etc.). HEC reports revenues for the DVD section sep...

Q: David Tax is the athletics director of Maritime University (MU).

David Tax is the athletics director of Maritime University (MU). He has been director for more than 10 years. MU is a men’s football and basketball powerhouse. The womenâ€...

Q: The Parksville location of Your Mart (YM), a chain of

The Parksville location of Your Mart (YM), a chain of small neighborhood grocery stores, is preparing its activity-based budget for January 2016. YM has three product categories: soft drinks, fresh pr...

Q: Your Mart (YM) has a Kaizen (continuous improvement)

Your Mart (YM) has a Kaizen (continuous improvement) approach to budgeting activity area costs for each month of 2016. Each successive month, the budgeted cost driver rate decreases by 0.2% relative t...

Q: Ken Howard, financial analyst at JVR Corporation, a manufacturer of

Ken Howard, financial analyst at JVR Corporation, a manufacturer of precision parts, is examining the behaviour of quarterly maintenance costs for budgeting purposes. Howard collects data on machine-h...

Q: Richmond Company manufactures products that often require specification changes or modifications to

Richmond Company manufactures products that often require specification changes or modifications to meet customers’ needs. Still, Richmond has been able to establish a normal spoilage rate of 2.5% of...

Q: Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false. 6. A contract in which an employee agrees not to work for a competitor for a reasonable period of time is unenforceable. 7. A buyer...

Q: The net present value method is the preferred method for capital budgeting

The net present value method is the preferred method for capital budgeting decisions. Therefore, managers will always use it.” Do you agree? Explain.

Q: A number of terms are listed below: /

A number of terms are listed below: Select the terms from the above list to complete the following sentences. The goal of ________________ is to provide capacity in a planned and orderly manner that...

Q: Norberto Garcia, general manager of the Argentinean subsidiary of Innovation Inc

Norberto Garcia, general manager of the Argentinean subsidiary of Innovation Inc., is considering the purchase of new industrial equipment to improve efficiency at its Cordoba plant. The equipment has...

Q: Southern Cola is considering the purchase of a special-purpose bottling

Southern Cola is considering the purchase of a special-purpose bottling machine for $23,000. It is expected to have a useful life of four years with no terminal disposal value. The plant manager estim...

Q: List and briefly describe each of the six parts in the capital

List and briefly describe each of the six parts in the capital budgeting decision process.

Q: Andrews Construction is analyzing its capital expenditure proposals for the purchase of

Andrews Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $6,000,000 for the year. Lori Bart, staff analyst...

Q: Edgeley Inc., a logistics operator located in Concord, Ontario,

Edgeley Inc., a logistics operator located in Concord, Ontario, is considering replacing one of its tractor trailers (informally known as a 53’ truck). The truck was purchased for $64,800 two years ag...

Q: Anna’s Bakery plans to purchase a new oven with an estimated useful

Anna’s Bakery plans to purchase a new oven with an estimated useful life of four years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no a...

Q: Met-All Manufacturing manufactures over 20,000 different products made

Met-All Manufacturing manufactures over 20,000 different products made from metal, including building materials, tools, and furniture parts. The manager of the Furniture Parts division has proposed th...

Q: LudmillaQuagg owns a fitness centre and is thinking of replacing the old

LudmillaQuagg owns a fitness centre and is thinking of replacing the old Fit-O-Matic machine with a brand new Flab-Buster 3000. The old FitO-Matic has a historical cost of $50,000 and accumulated depr...

Q: Why are capital budgeting decisions among the most important decisions in the

Why are capital budgeting decisions among the most important decisions in the life of a firm?

Q: Give an example of a capital budgeting decision and a financing decision

Give an example of a capital budgeting decision and a financing decision?

Q: a. Sykes, Inc. management is considering two projects:

a. Sykes, Inc. management is considering two projects: a plant expansion and a new computer system for the firm’s production department. Classify these projects as independent, mutually exclusive, or...

Q: Explain the difference between marginal and average tax rates, and identify

Explain the difference between marginal and average tax rates, and identify which of these rates is used in capital budgeting and why?

Q: What are the major shortcomings of using the Accounting Rate of Return

What are the major shortcomings of using the Accounting Rate of Return (ARR) method as a capital budgeting method?

Q: What changes have taken place in the capital budgeting techniques used by

What changes have taken place in the capital budgeting techniques used by U.S. companies?

Q: Staunton Energy Corporation managers are considering a capital budgeting project to replace

Staunton Energy Corporation managers are considering a capital budgeting project to replace some machinery used in one of the company’s oil refineries. Is the company’s WACC the appropriate discount r...

Q: What are the differences between cash flows used in capital budgeting calculations

What are the differences between cash flows used in capital budgeting calculations and past accounting earnings?

Q: Llama Wool Company management is doing some financial planning for the coming

Llama Wool Company management is doing some financial planning for the coming year. Llama plans to raise $10,000 in new equity this year and wants to pay a dividend to stockholders of $30,000. The fir...

Q: Future Enterprises is considering building a factory that will include an option

Future Enterprises is considering building a factory that will include an option to expand operations in three years. If things go well, the anticipated expansion will have a value of $10 million and...

Q: Ford Motor Company maintains production facilities in many different countries including Brazil

Ford Motor Company maintains production facilities in many different countries including Brazil, Taiwan, and the United States. Given the data in Exhibit 21.6, which production plant is likely to face...

Q: Your company is considering opening a new factory in Europe to serve

Your company is considering opening a new factory in Europe to serve the growing demand for your product there. What real options might you want to consider in your capital budgeting analysis of the f...

Q: Leyia and Larry Hartley of Columbus, Ohio have decided to start

Leyia and Larry Hartley of Columbus, Ohio have decided to start a family next year, so they are looking over their budget (illustrated in Table 3-5 as the “young married coupleâ...

Q: During slow economic times, the federal government’s budgeting priority often is

During slow economic times, the federal government’s budgeting priority often is to borrow so it can spend more money than it takes in. What happens to families that try that, and why?

Q: Now that you have read the chapter on financial planning, what

Now that you have read the chapter on financial planning, what do you recommend to Austin Patterson for his talk with Emily on the subject of financial planning regarding: 1. Setting financial goals?...

Q: The Financial Statements of Harry and Belinda Johnson Suggest Budgeting Problems

The Financial Statements of Harry and Belinda Johnson Suggest Budgeting Problems Harry has worked at a medium-size interior design firm for five years and earns a salary of $4,080 per month. He also r...

Q: Property acquisitions that are misclassified as maintenance expense would most likely be

Property acquisitions that are misclassified as maintenance expense would most likely be detected by an internal control system that provides for a. Investigation of variances within a formal budgetin...

Q: Jubilee’s Bakery is budgeting cash for 2017. The cash balance at

Jubilee’s Bakery is budgeting cash for 2017. The cash balance at December 31, 2016, was $6,000. Jubilee’s Bakery budgets 2017 cash receipts at $81,000. Estimated cash payments include $44,000 for inve...

Q: Julia Beecher, chief financial officer of Keller Wireless, is responsible

Julia Beecher, chief financial officer of Keller Wireless, is responsible for the company’s budgeting process. Beecher’s staff is preparing the Kelle...

Q: Mark Farmer, chief financial officer of Carvel Wireless, is responsible

Mark Farmer, chief financial officer of Carvel Wireless, is responsible for the company’s budgeting process. Farmer’s staff is preparing the Carvel c...

Q: Gary’s Convenience Stores’ income statement for the year ended December 31,

Gary’s Convenience Stores’ income statement for the year ended December 31, 2015, and its balance sheet as of December 31, 2015, reported the following: The busi...

Q: Maroney’s Convenience Stores’ income statement for the year ended December 31,

Maroney’s Convenience Stores’ income statement for the year ended December 31, 2015, and its balance sheet as of December 31, 2015, reported the following: The...

Q: Toyland prepares budgets to help manage the company. Toyland is budgeting

Toyland prepares budgets to help manage the company. Toyland is budgeting for the fiscal year ended January 31, 2016. During the preceding year ended January 31, 2015, sales totaled $9,600 million and...

Q: FunToys prepares budgets to help manage the company. FunToys is budgeting

FunToys prepares budgets to help manage the company. FunToys is budgeting for the fiscal year ended January 31, 2016. During the preceding year ended January 31, 2015, sales totaled $9,900 million and...

Q: Your factory’s inventory level was determined at 12 randomly selected times last

Your factory’s inventory level was determined at 12 randomly selected times last year, with the following results: 313, 891, 153, 387, 584, 162, 742, 684, 277, 271, 285, 845 a. Find the typical invent...

Q: A random sample of 50 recent patient records at a clinic shows

A random sample of 50 recent patient records at a clinic shows that the average billing per visit was $53.01 and the standard deviation was $16.48. a.* Find the standard error of the average and inter...

Q: It is budgeting time again, and you would like to know

It is budgeting time again, and you would like to know the expected payoff (in terms of dollars collected) of spending an extra dollar on collection of delinquent accounts, after adjusting for the siz...

Q: For each of the following situations tell whether the predicted value or

For each of the following situations tell whether the predicted value or the residual would be most useful. a. For budgeting purposes you need to know what number to place under “cost of goods sold” b...

Q: Which activity (correlation or regression analysis) is involved in each

Which activity (correlation or regression analysis) is involved in each of the following situations? a. Investigating to see whether there is any measurable connection between advertising expenditures...

Q: Why are cash management and cash budgeting important to a company’s survival

Why are cash management and cash budgeting important to a company’s survival?

Q: Why is it necessary to consider changes to working capital accounts as

Why is it necessary to consider changes to working capital accounts as part of the capital budgeting decision?

Q: Complete the partial knowledge map below by suggesting connections between the four

Complete the partial knowledge map below by suggesting connections between the four elements.

Q: One ethical issue related to budgeting is “padding” the budget

One ethical issue related to budgeting is “padding” the budget; that is, deliberately overstating resources needed. How would an ethical egoist view the practice of padding the budget? A utilitarian?...

Q: One of the steps in a financial statement audit is to review

One of the steps in a financial statement audit is to review the company’s internal control system. What internal controls would you recommend for a zero-based budgeting process?

Q: Which phase of the SDLC is described by each independent case below

Which phase of the SDLC is described by each independent case below? a. Dolores used design specifications to create database tables for employee records. b. Eric works at a “help desk” answering ques...

Q: 1. A capital budget is the tool hospitality managers use to

1. A capital budget is the tool hospitality managers use to plan and evaluate A. the purchase of fixed assets. B. the amount of cash to keep on hand. C. their selling prices. D. their operating expens...

Q: You have recently been hired by Swan Motors, Inc. (SMI),

You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded eight years ago by Joe Swan. Joe found a method to manufacture a cheaper...

Q: Shelley Couts, the owner of Conch Republic Electronics, has received

Shelley Couts, the owner of Conch Republic Electronics, has received the capital budgeting analysis from Jay McCanless for the new smartphone the company is considering. Shelley is pleased with the re...

Q: You have recently been hired by Swan Motors, Inc. (SMI),

You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded eight years ago by Joe Swan. Joe found a method to manufacture a cheaper...

Q: Shelley Couts, the owner of Conch Republic Electronics, has received

Shelley Couts, the owner of Conch Republic Electronics, has received the capital budgeting analysis from Jay McCanless for the new smartphone the company is considering. Shelley is pleased with the re...

Q: Why does personal financial planning involve other disciplines as shown in Figure

Why does personal financial planning involve other disciplines as shown in Figure 1.3? Give some practical examples of their use. Figure 1.3:

Q: Richard and Monica have diametrically opposite points of view on debt.

Richard and Monica have diametrically opposite points of view on debt. Richard views debt as an opportunity to generate cash to make up for past investment losses. He has asked you whether he should r...

Q: Compare capital budgeting practices as outlined in this chapter with those used

Compare capital budgeting practices as outlined in this chapter with those used on a day-to-day basis.

Q: The controller of Trenshaw Company wants to improve the company’s control system

The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2020. June 30, 2...

Q: Green Landscaping Inc. is preparing its budget for the first quarter

Green Landscaping Inc. is preparing its budget for the first quarter of 2020. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end th...

Q: Appliance Possible Inc. (AP) is a manufacturer of toaster

Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the curr...

Q: The university computer lab's director keeps track of the lab usage,

The university computer lab's director keeps track of the lab usage, as measured by the number of students using the lab. This particular function is very important for budgeting purposes. The compute...

Q: Brook’s Window Shields Inc. is trying to calculate its cost of

Brook’s Window Shields Inc. is trying to calculate its cost of capital for use in a capital budgeting decision. Mr. Glass, the vice president of finance, has given you the following information and ha...

Q: A-Rod Manufacturing Company is trying to calculate its cost of

A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Jeter, the vice president of finance, has given you the following information...

Q: Northwest Utility Company faces increasing needs for capital. Fortunately, it

Northwest Utility Company faces increasing needs for capital. Fortunately, it has an Aa3 credit rating. The corporate tax rate is 25 percent. Northwest’s treasurer is trying to deter...

Q: Why does capital budgeting rely on analysis of cash flows rather than

Why does capital budgeting rely on analysis of cash flows rather than on net income?

Q: Explain how the concept of risk can be incorporated into the capital

Explain how the concept of risk can be incorporated into the capital budgeting process.

Q: Explain how the bond refunding problem is similar to a capital budgeting

Explain how the bond refunding problem is similar to a capital budgeting decision.

Q: What are the important administrative considerations in the capital budgeting process?

What are the important administrative considerations in the capital budgeting process?

Q: Perhaps the national debt and federal budget deficits are really not so

Perhaps the national debt and federal budget deficits are really not so large and threatening. For example, it can be argued that we should use real rather than nominal values to report the national d...

Q: Prepare a cash budget for Atlas Products, Inc., for the

Prepare a cash budget for Atlas Products, Inc., for the first quarter of 2017, based on the following information: The budgeting section of the corporate finance department of Atlas Products has recei...

Q: Which method of promotional budgeting should a small retailer use? A

Which method of promotional budgeting should a small retailer use? A large retailer? Why?

Q: How does the basic net present value model of capital budgeting deal

How does the basic net present value model of capital budgeting deal with the problem of project risk? What are the shortcomings of this approach?

Q: How would you define risk as it is used in a capital

How would you define risk as it is used in a capital budgeting analysis context?

Q: How does the basic net present value capital budgeting model deal with

How does the basic net present value capital budgeting model deal with the phenomenon of increasing risk of project cash flows over time?

Q: What are the primary advantages and disadvantages of applying simulation to capital

What are the primary advantages and disadvantages of applying simulation to capital budgeting risk analysis?

Q: What major problems can you foresee in applying capital budgeting techniques to

What major problems can you foresee in applying capital budgeting techniques to investments made by public sector and not-for-profit enterprises or organizations?

Q: Discuss how capital budgeting procedures might be used by each of the

Discuss how capital budgeting procedures might be used by each of the following: a. Personnel managers b. Research and development staffs c. Advertising executives

Q: How is the opportunity cost concept used in the capital budgeting process

How is the opportunity cost concept used in the capital budgeting process?

Q: The Cooper Electronics Company has developed the following schedule of potential investment

The Cooper Electronics Company has developed the following schedule of potential investment projects that may be undertaken during the next 6 months: a. If Cooper requires a minimum rate of return o...

Q: Suppose that FedEx Kinko’s has decided to install personal computers and printers

Suppose that FedEx Kinko’s has decided to install personal computers and printers in its Pittsburgh store that will be rented to customers on an hourly basis. FedEx Kinko’s management has called in co...

Q: Capital budgeting for a foreign project uses the same theoretical framework as

Capital budgeting for a foreign project uses the same theoretical framework as domestic capital budgeting. What are the basic steps in domestic capital budgeting?

Q: How is foreign exchange risk sensitivity factored into the capital budgeting analysis

How is foreign exchange risk sensitivity factored into the capital budgeting analysis of a foreign project?

Q: How is expropriation risk factored into the capital budgeting analysis of a

How is expropriation risk factored into the capital budgeting analysis of a foreign project?

Q: What is real option analysis? How is it a better method

What is real option analysis? How is it a better method of making investment decisions than traditional capital budgeting analysis?

Q: Capital budgeting for a foreign project is considerably more complex than the

Capital budgeting for a foreign project is considerably more complex than the domestic case. What are the factors that add complexity?

Q: Capital projects provide both operating cash flows and financial cash flows.

Capital projects provide both operating cash flows and financial cash flows. Why are operating cash flows preferred for domestic capital budgeting but financial cash flows given major consideration in...

Q: Southern Cola is considering the purchase of a special-purpose bottling

Southern Cola is considering the purchase of a special-purpose bottling machine for $23,000. It is expected to have a useful life of four years with no terminal disposal value. The plant manager estim...

Q: Innovation, Inc., is considering the purchase of a new industrial

Innovation, Inc., is considering the purchase of a new industrial electric motor to improve efficiency at its Fremont plant. The motor has an estimated useful life of five years. The estimated pretax...

Q: Home Entertainment Center (HEC) operates a large store in San

Home Entertainment Center (HEC) operates a large store in San Francisco. The store has both a video section and a music (compact disks and tapes) section. HEC reports revenues for the video section se...

Q: The Tracy Corporation has a machining facility specializing in jobs for the

The Tracy Corporation has a machining facility specializing in jobs for the aircraft-components market. Tracy’s previous simple job-costing system had two direct-cost categories (dir...

Q: Logo Specialties manufactures, among other things, woolen blankets for the

Logo Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased fr...

Q: Ken Howard, financial analyst at KMW Corporation, is examining the

Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine hours worked and mainte...

Q: Ludmilla Quagg owns a fitness center and is thinking of replacing the

Ludmilla Quagg owns a fitness center and is thinking of replacing the old Fit-O-Matic machine with a brand new Flab-Buster 3000. The old Fit-O-Matic has a historical cost of $50,000 and accumulated de...

Q: Unbreakable Manufacturing manufactures over 20,000 different products made from metal

Unbreakable Manufacturing manufactures over 20,000 different products made from metal, including building materials, tools, and furniture parts. The manager of the furniture parts division has propose...

Q: George Perez is the controller at Allied Electronics, a manufacturer of

George Perez is the controller at Allied Electronics, a manufacturer of devices for the computer industry. He is being considered for a promotion to chief financial officer. Required: 1. In this tabl...

Q: The Chelsea store of Family Supermarket (FS), a chain of

The Chelsea store of Family Supermarket (FS), a chain of small neighborhood grocery stores, is preparing its activity-based budget for January 2011. FS has three product categories: soft drinks, fresh...

Q: Family Supermarkets (FS) has a kaizen (continuous improvement)

Family Supermarkets (FS) has a kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2011. Each successive month, the budgeted cost-driver rate decreases by 0....

Q: In this chapter, you learned about the benefits of budgeting for

In this chapter, you learned about the benefits of budgeting for a business. It is also important for individuals, especially students. Jo is an accounting major. Jo's estimate of expenses for the nex...

Q: Health Care Inc. (HCI) uses a flexible budgeting system

Health Care Inc. (HCI) uses a flexible budgeting system, rather than only the current master budget. The following data are available for HCI's expected costs at production levels of 100,000, 110,000,...

Q: Kitchen Care Inc. (KCI) is a manufacturer of toaster

Kitchen Care Inc. (KCI) is a manufacturer of toaster ovens. To improve control over operations, the president of KCI wants to begin using a flexible budgeting system, rather than use only the current...

Q: Waterways Corporation has recently acquired a small manufacturing operation in British Columbia

Waterways Corporation has recently acquired a small manufacturing operation in British Columbia that produces one of its more popular items. This plant will provide these units for resale in retail ha...

Q: Peters Corporation operates on a calendar-year basis. It begins

Peters Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August when the president sets targets for the total dollar sales and net income before taxes for t...

Q: Summarize all the cash flows that cannot be used in the capital

Summarize all the cash flows that cannot be used in the capital budgeting process and explain the reasons.

Q: Your boss is very puzzled by the finance courses in his MBA

Your boss is very puzzled by the finance courses in his MBA program. He has learned that “cash flow is king,” but notices that the capital budgeting problems spend a lot of time and effort dealing wit...

Q: What is the financial manager’s goal in selecting investment projects for the

What is the financial manager’s goal in selecting investment projects for the firm? Define the capital budgeting process, and explain how it helps managers achieve their goal.

Q: Why is it important to evaluate capital budgeting projects on the basis

Why is it important to evaluate capital budgeting projects on the basis of incremental cash flows?

Q: Diagram and describe the three types of net cash flows for a

Diagram and describe the three types of net cash flows for a capital budgeting project.

Q: Are most mutually exclusive capital budgeting projects equally risky? If you

Are most mutually exclusive capital budgeting projects equally risky? If you think about a firm as a portfolio of many different kinds of investments, how can the acceptance of a project change a firm...

Q: Define risk in terms of the cash flows from a capital budgeting

Define risk in terms of the cash flows from a capital budgeting project. How can determination of the breakeven cash inflow be used to gauge project risk?

Q: Briefly explain how the following items affect the capital budgeting decisions of

Briefly explain how the following items affect the capital budgeting decisions of multinational companies: (a) exchange rate risk; (b) political risk; (c) tax law differences; (d) transfer pricing; an...

Q: Explain why a firm whose stock is actively traded in the securities

Explain why a firm whose stock is actively traded in the securities markets need not concern itself with diversification. Despite this reason, how is the risk of capital budgeting projects frequently...

Q: Describe the four basic steps involved in the lease-versus-

Describe the four basic steps involved in the lease-versus-purchase decision process. How are capital budgeting methods applied in this process?

Q: Ken Allen, capital budgeting analyst for Bally Gears, Inc.,

Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck g...

Q: Diane Dennison is a financial analyst working for a large chain of

Diane Dennison is a financial analyst working for a large chain of discount retail stores. Her company is looking at the possibility of replacing the existing fluorescent lights in all of its stores w...

Q: Fiftycent Inc. has hired you to advise the firm on a

Fiftycent Inc. has hired you to advise the firm on a capital budgeting issue involving two unequal-lived, mutually exclusive projects, S and T. The cash flows for each project are presented in the fol...

Q: Jenny Rene, the CFO of Asor Products Inc., has just

Jenny Rene, the CFO of Asor Products Inc., has just completed an evaluation of a proposed capital expenditure for equipment that would expand the firm’s manufacturing capacity. Using the traditional N...

Q: Recall from P11-28 that when the market price of gold

Recall from P11-28 that when the market price of gold is C$1,562.50 per ounce (C$ stands for Canadian dollars) the NPV for Maritime Resources Corp.—a Canadian mining firm that was reopening an old gol...

Q: As president of Young’s of California, a large clothing chain,

As president of Young’s of California, a large clothing chain, you have just received a letter from a major stockholder. The stockholder asks about the company’s dividend policy. In fact, the stockhol...

Q: Suppose a firm uses a constant WACC to calculate the NPV of

Suppose a firm uses a constant WACC to calculate the NPV of all of its capital budgeting projects, rather than adjusting for the risk of the individual projects. What errors will the firm make in its...

Q: 1. Which of the following is not a warning sign of

1. Which of the following is not a warning sign of potential liquidity problems? a. Declines in working capital and daily cash flows b. Increases in accounts receivable and longer collection periods c...

Q: 1. Capital budgeting is the process of doing which of the

1. Capital budgeting is the process of doing which of the following? a. Allocating capital among bonds and stocks. b. Making certain adequate capital is available to pay bills when they come due. c. B...

Q: 1. Risk-adjusted discount rates should be used to evaluate

1. Risk-adjusted discount rates should be used to evaluate capital budgeting projects for which of the following reasons? a. The risk/expected return tradeoff in finance b. Otherwise low-risk, low-ret...

Q: 1. True or False? Net working capital changes will affect

1. True or False? Net working capital changes will affect a project’s operating cash flow estimates. a. True because the project may affect levels of inventory or accounts receivable. b. True because...

Q: 1. The stages of the capital budgeting process do not include

1. The stages of the capital budgeting process do not include which one of the following? a. Design b. Identification c. Development d. Follow-up 2. In which stage of the capital budgeting process a...

Q: 1. How is NPV computed? a. Present value

1. How is NPV computed? a. Present value of future cash flows minus cost b. Sum of cash inflow minus cost c. Future value of cash inflows minus future value of cost d. Present value of profits from th...

Q: 1. How is MIRR computed? a. By finding

1. How is MIRR computed? a. By finding the discount rate that equates the present value of the cash outflows with the terminal value of the cash inflows of a capital budgeting project b. By finding th...

Q: 1. What is the profitability index (PI)? a

1. What is the profitability index (PI)? a. The benefit/cost ratio of a capital budgeting project, in present value terms. b. The benefit/cost ratio of a capital budgeting project, in future value ter...

Q: 1. The payback period is the amount of time until a

1. The payback period is the amount of time until a project achieves which of the following? a. Profits are positive b. Total cash flows (outflows and inflows) sum to zero c. Revenues equal operating...

Q: 1. Why might managers prefer to use capital budgeting techniques other

1. Why might managers prefer to use capital budgeting techniques other than the NPV? a. They give the manager an intuitive feel for a safety margin in case cash flow estimates are too high. b. Because...

Q: 1. What is the stand-alone principle? a

1. What is the stand-alone principle? a. Mutually exclusive projects should be considered one at a time. b. Independent projects should be considered one at a time. c. Each capital budgeting project m...

Q: 1. What is the relationship between a project’s cost of capital

1. What is the relationship between a project’s cost of capital and its minimum required rate of return? a. The cost of capital is always greater than the minimum required return. b. The cost of capit...

Q: Sensitivity analysis involves changing one variable at a time in a capital

Sensitivity analysis involves changing one variable at a time in a capital budgeting situation and seeing how NPV changes. Perform sensitivity analysis on the each of the following variables from prob...

Q: Compute operating cash flows for the following: a. A

Compute operating cash flows for the following: a. A project that is expected to have sales of $10,000, expenses of $5,000, depreciation of $200, an investment of $50 in net working capital and a 20 p...

Q: Why might there be tax implications when an asset is sold at

Why might there be tax implications when an asset is sold at the termination of a capital budgeting project?

Q: Identify the internal rate of return method and describe how it is

Identify the internal rate of return method and describe how it is used in making capital budgeting decisions.

Q: Describe the payback period method for making capital budgeting decisions.

Describe the payback period method for making capital budgeting decisions.

Q: Why might managers want to use other techniques besides NPV to make

Why might managers want to use other techniques besides NPV to make capital budgeting decisions?

Q: What is a way to keep managers accountable for their capital budgeting

What is a way to keep managers accountable for their capital budgeting forecasts and estimates?

Q: Briefly describe the five stages in the capita- budgeting process.

Briefly describe the five stages in the capita- budgeting process.

Q: Identify some capital budgeting considerations that are unique to multinational corporations.

Identify some capital budgeting considerations that are unique to multinational corporations.

Q: 1. What are typical titles for a firm's top financial officers

1. What are typical titles for a firm's top financial officers? a. Corporate financial officer, treasurer, controlling manager b. Chief financial officer, payroll, controller c. Controlling manager...

Q: “What do you mean we’ve used up all our cash and “What do you mean we’ve used up all our cash and

“What do you mean we’ve used up all our cash and lines of credit? I don’t get it! I thought we had a healthy financial position as per last year’s financial statements. How could this have happened, P...

Q: What is zero-based budgeting and how does it differ from

What is zero-based budgeting and how does it differ from other more traditional forms of budgeting? Discuss the applicability of zero-based budgeting to profit-oriented organizations.

Q: Explain the meaning of each of the undernoted terms, comment on

Explain the meaning of each of the undernoted terms, comment on their likely impact on cash budgeting and profit planning and suggest ways in which any adverse effects of each may be reduced. (a). Bud...

Q: The chief executive of your organization has recently seen a reference to

The chief executive of your organization has recently seen a reference to zero-based budgeting. He has asked for more details of the technique. You are required to prepare a report for him explaining:...

Q: A company operates a number of hairdressing establishments that are managed on

A company operates a number of hairdressing establishments that are managed on a franchise arrangement. The franchisor offers support using a PC package that deals with profit budgeting and control in...

Q: Limitation plc commenced the manufacture and sale of a new product in

Limitation plc commenced the manufacture and sale of a new product in the fourth quarter of the previous year. In order to facilitate the budgeting process for quarters 1 and 2 of the next year, the f...

Q: You have been provided with the following operating statement, which represents

You have been provided with the following operating statement, which represents an attempt to compare the actual performance for the quarter which has just ended with the budget: Required: (a). Usi...

Q: Synchro dot Ltd manufactures two standard products, product 1 selling at

Synchro dot Ltd manufactures two standard products, product 1 selling at £15 and product 2 selling at £18. A standard absorption costing system is in operation and summarized...

Q: The accountant of Laburnum Ltd is preparing documents for a forthcoming meeting

The accountant of Laburnum Ltd is preparing documents for a forthcoming meeting of the budget committee. Currently, variable cost is 40 per cent of selling price and total fixed costs are Â&poun...

Q: Big data is a term that describes the large volume of raw

Big data is a term that describes the large volume of raw data, both structured and unstructured, that inundates a business on a daily basis. It includes information such as email messages, social med...

Q: Although the apex of ZBB’s popularity in the late 1970s is long Although the apex of ZBB’s popularity in the late 1970s is long

Although the apex of ZBB’s popularity in the late 1970s is long past, there has been renewed interest in ZBB in today’s environment of fiscal constraint, says Shayne Kavanagh in an article published i...

Q: The case was prepared as the basis for discussion rather than to

The case was prepared as the basis for discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Danfoss Drives A/S is a Danish producer of frequenc...

Q: In November 2012, a consultant was employed to review and document

In November 2012, a consultant was employed to review and document the planning and control systems of Integrated Technology Services (UK) Ltd (ITS-UK), to ensure that these were effectively meeting t...

Q: This case study is taken from Ducker, J., Head,

This case study is taken from Ducker, J., Head, A., McDonnell, B., O'Brien, R. and Richardson, S. (1998), A Creative Approach to Management Accounting: Case Studies in Management Accounting and Contro...

Q: Airport Complex was founded in Northern Europe in the early 1960s,

Airport Complex was founded in Northern Europe in the early 1960s, and at the time it primarily served as a domestic airport. During the 1980s, flights to foreign destinations became an ever more vita...

Q: This case study is taken from Ducker, J., Head,

This case study is taken from Ducker, J., Head, A., McDonnell, B., O'Brien, R. and Richardson, S. (1998), A Creative Approach to Management Accounting: Case Studies in Management Accounting and Contro...

Q: Southern Paper Inc. is a global packaging company headquartered in the

Southern Paper Inc. is a global packaging company headquartered in the United States. The company was founded in the 1880s and has three principal business sectors – forest products, packaging and pap...

Q: Haskin Company was founded 40 years ago and now has several manufacturing

Haskin Company was founded 40 years ago and now has several manufacturing plants in the Northeast and Midwest. The evaluation of proposed capital expenditures became increasingly difficult for managem...

Q: The following questions concern internal controls in the acquisition and payment cycle

The following questions concern internal controls in the acquisition and payment cycle. Choose the best response. a. Which of the following questions is an auditor least likely to include on an intern...

Q: In one group, find a local business, such as a

In one group, find a local business, such as a copy shop, that rents time on desktop computers for an hourly rate. Determine the hourly rate. In the other group, determine the price of a mid-range des...

Q: One of the problems of using simulation to incorporate risk into capital

One of the problems of using simulation to incorporate risk into capital budgeting is related to the idea that the probability distributions of successive cash flows usually are not independent. If t...

Q: The Brown Owl Corporation manufactures high quality outdoor equipment for adventurous people

The Brown Owl Corporation manufactures high quality outdoor equipment for adventurous people who enjoy hiking, hunting, climbing, and trekking under extreme conditions. The firm has been very success...

Q: Taunton Construction Inc.'s capital situation is described as follows:

Taunton Construction Inc.'s capital situation is described as follows: Debt: The firm issued 10,000 25-year bonds10 years ago at their par value of $1,000. The bonds carry a coupon rate of 14% and...

Q: Find the MIRR and the IRR for the following capital budgeting project

Find the MIRR and the IRR for the following capital budgeting project and comment on the difference between the two. The cost of capital is 12%.

Q: You are a financial analyst for the Ajax Company, which uses

You are a financial analyst for the Ajax Company, which uses about $1M of inventory per month. The purchasing manager has come to you for help with a buying decision. He can get a big discount on $1...

Q: Charlie Brown is thinking about starting Wing-It Airlines to fly

Charlie Brown is thinking about starting Wing-It Airlines to fly a commuter route in and out of a major city. Four planes are on the market that will do the job, but each has different flight, load,...

Q: Most top executives are graded primarily on their results in terms of

Most top executives are graded primarily on their results in terms of net income rather than net cash flow. Why then, is capital budgeting done with incremental cash flows rather than with incrementa...

Q: Creighton Inc. is preparing a bid to sell a large telephone

Creighton Inc. is preparing a bid to sell a large telephone communications system to a major business customer. It is characteristic of the telephone business that the vendor selling a system gets su...

Q: Webley Motors, a manufacturer of small gas engines, has been

Webley Motors, a manufacturer of small gas engines, has been working on a new design for several years. It's now considering going into the market with the new product, and has projected future sales...

Q: Ed Draycutt is the engineering manager of Airway Technologies, a firm

Ed Draycutt is the engineering manager of Airway Technologies, a firm that makes computer systems for air traffic control installations at airports. He has proposed a new device the success of which...

Q: Charlie Henderson, a senior manager in the Bartok Company, is

Charlie Henderson, a senior manager in the Bartok Company, is known for taking risks. He recently proposed that the company expand its operations into a new and untried field. He put together a set...

Q: The engineering department at Digitech Inc. wants to buy a new

The engineering department at Digitech Inc. wants to buy a new, state-of-the-art computer. The proposed machine is faster than the one now being used, but whether the extra speed is worth the expense...

Q: Whitefish Inc. operates a fleet of 15 fishing boats in the

Whitefish Inc. operates a fleet of 15 fishing boats in the North Atlantic Ocean. Fishing has been good in the last few years, as has the market for product, so the firm can sell all the fish it can c...

Q: The Capricorn Company is launching a new venture in a field related

The Capricorn Company is launching a new venture in a field related to, but separate from, its present business. Management is proposing that financing for the new enterprise be supplied by a local b...

Q: You're the CFO of a small company that is considering a new

You're the CFO of a small company that is considering a new venture. The president and several other members of management are very excited about the idea for reasons related to engineering and marke...

Q: Gander, Inc. is considering two projects with the following cash

Gander, Inc. is considering two projects with the following cash flows. Gander uses the payback period method of capital budgeting and accepts only projects with payback periods of 3 years or less....

Q: Kneelson and Botes Inc. (K&B) is a

Kneelson and Botes Inc. (K&B) is a construction company that does road and bridge work for the state highway authority. The state government solicits bids on construction projects from private co...

Q: Capital budgeting is based on the idea of identifying incremental cash flows

Capital budgeting is based on the idea of identifying incremental cash flows, so overheads aren't generally included. Does this practice create a problem for a firm that over a long period of time ta...

Q: Why is it desirable to construct capital budgeting rules so that higher

Why is it desirable to construct capital budgeting rules so that higher risk projects become less acceptable than lower risk projects?

Q: Harrington Inc. is introducing a new product in its line of

Harrington Inc. is introducing a new product in its line of household appliances. Household products generally have ten-year life cycles and are viewed as capital budgeting projects over that period....

Q: What is a chart of accounts and what is its role in

What is a chart of accounts and what is its role in the budgeting process?

Q: Explain the main steps in the budgeting process.

Explain the main steps in the budgeting process.

Q: ‘I’m really not sure our information systems are as well placed

‘I’m really not sure our information systems are as well placed as they could be to help us drive our performance. The industry data and my own observations suggest we need to do better in this regard...

Q: The Dancing Goat is a small coffee operation with ten cafés located

The Dancing Goat is a small coffee operation with ten cafés located around Melbourne. Each has a manager and up to five full-time employees to cover the 7.30 am to 4.30 pm, Monday to Satu...

Q: The accountant at Fighting Kites has always prepared a budget that is

The accountant at Fighting Kites has always prepared a budget that is calculated using only one estimated volume of sales. He has asked you to help him set up a spreadsheet that can be used for sensit...

Q: Required (a) (i) Explain how

Required (a) (i) Explain how the budgeting process helps top managers articulate decisions about the use of resources. (ii) Explain how a budget identifies the resources available to individual depar...

Q: Outline the meaning of the profit planning or strategic budgeting process.

Outline the meaning of the profit planning or strategic budgeting process.

Q: Why do proponents of the Beyond Budgeting movement recommend abandoning traditional budgets

Why do proponents of the Beyond Budgeting movement recommend abandoning traditional budgets?

Q: What distinguishes zero-based budgeting from other types of budgeting?

What distinguishes zero-based budgeting from other types of budgeting?

Q: Explain how program budgeting assists with planning in discretionary cost centres.

Explain how program budgeting assists with planning in discretionary cost centres.

Q: Explain how zero-based budgeting assists with planning in discretionary cost

Explain how zero-based budgeting assists with planning in discretionary cost centres.

Q: In the planning or strategic budgeting process, explain how a sales

In the planning or strategic budgeting process, explain how a sales revenue budget can be determined.

Q: Explain why the budgeting process might not necessarily be successfully implemented

Explain why the budgeting process might not necessarily be successfully implemented in an organisation.

Q: How can budgeting assist an entity to efficiently use its human resources

How can budgeting assist an entity to efficiently use its human resources?

Q: Ange Pala, the chief financial officer of a national tourist company

Ange Pala, the chief financial officer of a national tourist company, has become increasingly dissatisfied with the current budget process in the organisation. Much of her dissatisfaction relates to t...

Q: Trinity Records is a company that finds and signs a new artist

Trinity Records is a company that finds and signs a new artist, develops a marketing strategy, records the music, and distributes the music to retailers. Data for the CD division of Trinity Records, w...

Q: Discuss how a hospital could use activity-based budgeting to assist

Discuss how a hospital could use activity-based budgeting to assist with planning for the coming year.

Q: Continuing from exercise 5.23, the financial controller of Data

Continuing from exercise 5.23, the financial controller of Data Processors recently attended an accounting conference, which discussed the benefits of adopting kaizen budgeting within an activity-base...

Q: Bullen & Company makes and sells upmarket carry bags for laptop computers

Bullen & Company makes and sells upmarket carry bags for laptop computers. John Crane, controller, is responsible for preparing Bullen’s master budget and has assembled the follo...

Q: The Zel Company operates at local flea markets. It has budgeted

The Zel Company operates at local flea markets. It has budgeted the following sales for the indicated months. Zel’s success in this specialty market is due in large part to the ext...

Q: Play Time Toys is organised into two major divisions: marketing and

Play Time Toys is organised into two major divisions: marketing and production. The production division is further divided into three departments: puzzles, dolls and video games. Each production depar...

Q: Energy plays an important role in improving people’s lifestyles. In Australia

Energy plays an important role in improving people’s lifestyles. In Australia, our energy consumption is growing and is forecasted to increase by 50 per cent over the next 15 years. The available powe...

Q: Xi Phan, CEO of the Fine Furniture Supply Group, is

Xi Phan, CEO of the Fine Furniture Supply Group, is considering an investment to upgrade his current computer-aided design equipment. The new equipment would cost $110 000, have a five-year useful lif...

Q: Software Galore sells gaming software that is downloaded to the customer’s device

Software Galore sells gaming software that is downloaded to the customer’s device on purchase. The owner, Fred, was talking with a friend who sang the praises of flexible budgeting in his manufacturin...

Q: Paper Bright Industries uses flexible budgeting to assess budgeted expectations against actual

Paper Bright Industries uses flexible budgeting to assess budgeted expectations against actual performance. Last month Paper Bright produced 12 000 units and incurred direct materials cost of $150 000...

Q: Describe the pros and cons of each of the capital budgeting methods

Describe the pros and cons of each of the capital budgeting methods learned in this chapter: (a) net present value, (b) internal rate of return, (c) payback, and (d) accrual accounting rate of ret...

Q: Suppose an entity has five different capital budgeting projects from which to

Suppose an entity has five different capital budgeting projects from which to choose, but has constrained funds and cannot implement all of the projects. Explain why comparing the projects’ NPVs is be...

Q: Put the following six steps for capital budgeting in the most likely

Put the following six steps for capital budgeting in the most likely order, numbering the first activity as number 1, the second as 2, and so on. • Perform sensitivity analysis. • Identify decision al...

Q: One of the downsides of using a participative style of budgeting is

One of the downsides of using a participative style of budgeting is the possibility of ‘budgetary slack’. Explain whether you consider the strengths of a participative style of budgeting outweigh the...

Q: Amy Turner is the newly appointed chief accountant at Satellite Data Components

Amy Turner is the newly appointed chief accountant at Satellite Data Components (SDC), which designs and manufactures data components for the satellite and car industries. One of Amy’s early tasks is...

Q: Dairy Australia Ltd’s annual operating plan for 2017–2018 outlines its

Dairy Australia Ltd’s annual operating plan for 2017–2018 outlines its three-year plan following revision of its strategic direction. Access the plan (available at www.dairyaustralia.com.au) and outli...

Q: Veronica Shan owns and operates the Quality First printing company. Veronica

Veronica Shan owns and operates the Quality First printing company. Veronica and her staff do not engage in planning or budgeting, as they consider the business too small to warrant their attention to...

Q: Betty Wu is the manager of a large retail store specialising in

Betty Wu is the manager of a large retail store specialising in children’s clothing and accessories. As Betty is the longest serving employee, she believes that she knows what is best for the store. S...

Q: Quality Goods Company operates antique and second-hand goods stores throughout

Quality Goods Company operates antique and second-hand goods stores throughout Victoria. Such stores are currently very popular and sales are increasing each month. It has budgeted the following sales...

Q: The budgeting process for a midwestern college resulted in expense forecasts for

The budgeting process for a midwestern college resulted in expense forecasts for the coming year (in $ millions) of $9, $10, $11, $12, and $13. Because the actual expenses are unknown, the following r...

Q: Solve the capital budgeting problem in Problem 12.21(a

Solve the capital budgeting problem in Problem 12.21(a) using the linear programming model and a spreadsheet. Problem 12.21(a): A capital-budgeting problem is defined as follows: three projects are to...

Q: For some years, the City of Armstrong Power Authority has used

For some years, the City of Armstrong Power Authority has used 4-20 mA technology to measure parameters such as pressure, temperature, flow rates, and speed of various machinery and systems installed...

Q: List at least three characteristics of a capital budgeting study.

List at least three characteristics of a capital budgeting study.

Q: When there are a total of four projects involved in a capital

When there are a total of four projects involved in a capital budgeting study, the maximum number of bundles that can be formulated is: (a) 6 (b) 8 (c) 15 (d) 16

Q: All of the following are correct when a capital budgeting problem is

All of the following are correct when a capital budgeting problem is solved using the 0-1 integer linear programming model, except: (a) Partial investment in a project is acceptable. (b) The objective...

Q: Alyeski Tours operates day tours of coastal glaciers in Alaska on its

Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of p...

Q: The Gourmand Cooking School runs short cooking courses at its small campus

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of...

Q: Adger Corporation is a service company that measures its output based on

Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting...

Q: Endless Mountain Company manufactures a single product that is popular with outdoor

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the Unite...

Q: Endless Mountain Company manufactures a single product that is popular with outdoor

Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the Unite...

Q: You have been recruited by a former classmate, Susanna Wu,

You have been recruited by a former classmate, Susanna Wu, to join the finance team of a company that she founded recently. The company produces a unique product-line of hypo-allergenic cosmetics and...

Q: Catholic Charities Regional Agency serves several contiguous counties in Ohio. The

Catholic Charities Regional Agency serves several contiguous counties in Ohio. The finance committee of its Board of Directors monitors financial activity for the agency. This oversight includes decis...

Q: The company for which you work recently implemented time-driven activity

The company for which you work recently implemented time-driven activity-based costing (TDABC) in conjunction with its enterprise resource planning (ERP) system. Management is pleased with the revised...

Q: Refer to text Exhibit 10.19 (the ABB for KWS

Refer to text Exhibit 10.19 (the ABB for KWS). As the management accountant for KWS, you have been asked to evaluate the possibility of implementing a continuous-improvement (i.e., kaizen) budgeting s...

Q: Bob Bingham is the controller of Atlantis Laboratories, a manufacturer and

Bob Bingham is the controller of Atlantis Laboratories, a manufacturer and distributor of generic prescription pharmaceuticals. He is currently preparing the annual budget and reviewing the current bu...

Q: Rockyford Company must replace some machinery that has zero book value and

Rockyford Company must replace some machinery that has zero book value and a current market value of $1,800. One possibility is to invest in new machinery costing $40,000. This new machinery would pro...

Q: Lou Lewis, the president of Lewisville Company, has asked you

Lou Lewis, the president of Lewisville Company, has asked you to give him an analysis of the best use of a warehouse the company owns. Note: The company has a 40% effective tax rate. a. Lewisville Com...

Q: MaxiCare Corporation, a not-for-profit organization, specializes

MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in th...

Q: J. Morgan of SparkPlug Inc. has been approached to take

J. Morgan of SparkPlug Inc. has been approached to take over a production facility from B.R. Machine Company. The acquisition will cost $1,500,000, and the after-tax net cash inflows are expected to b...

Q: Richport Company manufactures products that often require specification changes or modifications to

Richport Company manufactures products that often require specification changes or modifications to meet customer needs. Consequently, Richport employs a job costing system for its operations. Althoug...

Q: Plantcity is a large nursery and retail store specializing in house and

Plantcity is a large nursery and retail store specializing in house and garden plants and supplies. Jean Raouth, the assistant manager, is in the process of budgeting monthly supplies expense for 2022...

Q: CompUSA Inc. sells computer hardware. It also markets related software

CompUSA Inc. sells computer hardware. It also markets related software and software-support services. The company prepares annual forecasts for sales, which are given below. In a typical month, total...

Q: As a newly hired management accountant, you have been asked to

As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you’ve been asked to do some what-if analyses. Following...

Q: National Auto Insurance company underwrites automobile coverage for the consumer market.

National Auto Insurance company underwrites automobile coverage for the consumer market. As part of the annual planning process, National requires monthly estimates for number of policies in force and...

Q: Norton Company, a manufacturer of infant furniture and carriages, is

Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages of preparing the annual budget for the coming year. Scott Ford recently joined Norton’s accounting staff and...

Q: As noted in the chapter, some individuals allege that the practice

As noted in the chapter, some individuals allege that the practice of tying managerial rewards to budgeted performance has dysfunctional consequences, including (but not limited to) gaming behavior. S...

Q: You and several of your classmates have just graduated from college and

You and several of your classmates have just graduated from college and are evaluating various investment opportunities, including a startup company that would produce high-quality jackets embroidered...

Q: A proposed investment has the following projected after-tax cash flows

A proposed investment has the following projected after-tax cash flows over its 3-year life: Initial outlay (time 0) = ($1,000) End of year 1 = $2,000 End of year 2 = $2,000 End of year 3 = ($3,700)...

Q: Estimated cash-flow data for each of two projects, A

Estimated cash-flow data for each of two projects, A and B, and the discount rate, r, to be used for the analysis of capital investment projects are given below: Discount rate, r = 10.0%. Required:...

Q: Mark-Wright Inc. (MWI) is a specialty frozen

Mark-Wright Inc. (MWI) is a specialty frozen food processor located in the midwestern states. Since its founding in 1982, MWI has enjoyed a loyal local clientele willing to pay premium prices for the...

Q: The George Company has a policy of maintaining an end-of

The George Company has a policy of maintaining an end-of-month cash balance of at least $30,000. In months where a shortfall is expected, the company can draw in $1,000 increments on a line of credit...

Q: Define the terms “relative performance contract” and “rolling financial

Define the terms “relative performance contract” and “rolling financial forecasts.” What role for these is envisioned by critics of the traditional budgeting process?

Q: Many accountants believe that the most important benefit of the master budgeting

Many accountants believe that the most important benefit of the master budgeting process is the end result: a set of budgeted (i.e., pro-forma) financial statements. What is the rationale for this vie...

Q: Some critics of budgeting believe that budgets are effective tools for planning

Some critics of budgeting believe that budgets are effective tools for planning but not for control purposes. What is the essence of this argument?

Q: What is zero-base budgeting (ZBB)?

What is zero-base budgeting (ZBB)?

Q: What are the distinguishing characteristics of capital budgeting decisions?

What are the distinguishing characteristics of capital budgeting decisions?

Q: In what ways can accountants add value to the capital budgeting process

In what ways can accountants add value to the capital budgeting process?

Q: In capital budgeting analysis, what is meant by the income tax

In capital budgeting analysis, what is meant by the income tax effect? Give three examples of the tax effect pertaining to the acquisition of new factory (manufacturing) equipment.

Q: What are the limitations of the payback period method for making capital

What are the limitations of the payback period method for making capital budgeting decisions (e.g., whether to accept or reject a proposed investment)? Does the present value payback period overcome t...

Q: List at least three important behavioral issues related to the capital budgeting

List at least three important behavioral issues related to the capital budgeting process.

Q: The budgeting process for a midwestern college resulted in expense forecasts for

The budgeting process for a midwestern college resulted in expense forecasts for the coming year (in $ millions) of $9, $10, $11, $12, and $13. Because the actual expenses are unknown, the following r...

Q: Read Problem 9–43. Instead of answering the requirements listed

Read Problem 9–43. Instead of answering the requirements listed in the problem, discuss the implications of SOX sections 302 and 404 regarding John Winslow’s contem...

Q: Weathereye Inc. manufactures weather satellites. The final assembly and testing

Weathereye Inc. manufactures weather satellites. The final assembly and testing of the satellites is a largely manual operation involving dozens of highly trained electronics technicians. The followin...

Q: Metropolitan Dental Associates is a large dental practice in Chicago. The

Metropolitan Dental Associates is a large dental practice in Chicago. The firm’s controller is preparing the budget for the next year. The controller projects a total of 48,000 offic...

Q: Western State University (WSU) is preparing its master budget for

Western State University (WSU) is preparing its master budget for the upcoming academic year. Currently, 8,000 students are enrolled on campus; however, the admissions office is forecasting a 5 percen...

Q: Alpha-Tech, a rapidly growing distributor of electronic components,

Alpha-Tech, a rapidly growing distributor of electronic components, is formulating its plans for 20x5. Carol Jones, the firm’s marketing director, has completed the following sales f...

Q: United Security Systems, Inc. (USSI), manufactures and sells

United Security Systems, Inc. (USSI), manufactures and sells security systems. The company started by installing photoelectric security systems in offices and has expanded into the private-home market...

Q: Healthful Foods Inc., a manufacturer of breakfast cereals and snack bars

Healthful Foods Inc., a manufacturer of breakfast cereals and snack bars, has experienced several years of steady growth in sales, profits, and dividends while maintaining a relatively low level of de...

Q: Mark Fletcher, president of SoftGro, Inc., was looking forward

Mark Fletcher, president of SoftGro, Inc., was looking forward to seeing the performance reports for November because he knew the company’s sales for the month had exceeded budget by...

Q: Building Services Co. (BSC) was started a number of

Building Services Co. (BSC) was started a number of years ago by Jim and Joan Forge to provide cleaning services to both large and small businesses in their home city. Over the years, as local busines...

Q: How does cloud-based budgeting make use of the Internet?

How does cloud-based budgeting make use of the Internet? What are its risks and benefits?

Q: LawnMate Company manufactures power mowers that are sold throughout the United States

LawnMate Company manufactures power mowers that are sold throughout the United States and Canada. The company uses a comprehensive budgeting process and compares actual results to budgeted amounts on...

Q: Samantha is the production manager for Wentworth Company. Each year,

Samantha is the production manager for Wentworth Company. Each year, she is involved in the company’s budgeting process. Company President Leslie has asked Samantha to submit the facility’s budgeted p...

Q: Shamrock Shades operates in mall kiosks throughout the southwestern United States.

Shamrock Shades operates in mall kiosks throughout the southwestern United States. Shamrock purchases sunglasses from bulk discounters and sells the sunglasses in the mall kiosks. Shamrock is in the p...

Q: Use the following terms to complete the sentences that follow. Terms

Use the following terms to complete the sentences that follow. Terms may be used once, more than once, or not at all: Capital expenditures budget Participative Budgetary slack Operating budgets Contro...

Q: Traditionally, Granite Company has accepted a proposal only if the payback

Traditionally, Granite Company has accepted a proposal only if the payback period is less than 50 percent of the asset’s useful life. Peggy Casteel is the new accounting manager. She suggested to mana...

Q: A number of terms and concepts from this chapter and a list

A number of terms and concepts from this chapter and a list of descriptions, definitions, and explanations appear as follows. For each term listed (1 through 9), choose at least one corresponding item...

Q: Citco Company is considering investing up to $500,000 in

Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. ∙ Project A would r...

Q: Citco Company is considering investing up to $500,000 in

Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. ∙ Project A would r...

Q: Budgets can be used in almost any type of organization including large

Budgets can be used in almost any type of organization including large corporations, small businesses, government organizations, universities, churches, and student clubs. Required: Choose any local o...

Q: Numerous personal financial planning or budgeting tools are available on the Internet

Numerous personal financial planning or budgeting tools are available on the Internet, many of them free. Choose at least two different online budgeting sites and input information for a typical perso...

Q: In the last several chapters, you have learned about many aspects

In the last several chapters, you have learned about many aspects of organizational structure, budgeting, and performance evaluation. None of these company characteristics operates in isolation. They...

Q: Explain why the sales budget is the starting point for a company’s

Explain why the sales budget is the starting point for a company’s budgeting process. Which budgets does the sales budget affect? Which budgets are not affected by the sales budget?

Q: How does the budgeting process differ for a service company compared to

How does the budgeting process differ for a service company compared to a manufacturing company?

Q: How is a merchandiser’s budgeting process different from that of a manufacturing

How is a merchandiser’s budgeting process different from that of a manufacturing company?

Q: What are the advantages and disadvantages of participative budgeting compared to top

What are the advantages and disadvantages of participative budgeting compared to top-down budgeting?

Q: Which capital budgeting methods incorporate the time value of money and which

Which capital budgeting methods incorporate the time value of money and which do not? Which are considered superior and why?

Q: Refer to the information pertaining to Endless Mountain Company that is provided

Refer to the information pertaining to Endless Mountain Company that is provided in Integration Exercise 11. Required: 1. Assume that the company expects to collect all of its credit sales in the quar...

Q: How does software aid firms in the budgeting process?

How does software aid firms in the budgeting process?

Q: John Barleycorn estimates his firm’s after-tax WACC at only 8

John Barleycorn estimates his firm’s after-tax WACC at only 8%. Nevertheless, he sets a 15% companywide discount rate to offset the optimistic biases of project sponsors and to impose “discipline” on...

Q: Explain how each of the following actions or problems can distort or

Explain how each of the following actions or problems can distort or disrupt the capital budgeting process. a. Overoptimism by project sponsors. b. Inconsistent forecasts of industry and macroeconomic...

Q: Draw up an outline or flowchart tracing the capital budgeting process from

Draw up an outline or flowchart tracing the capital budgeting process from the initial idea for a new investment project to the completion of the project and the start of operations. Assume the idea f...

Q: This is a question posed by the Becker’s Hospital Review website.

This is a question posed by the Becker’s Hospital Review website. According to an article on the website from October 2019, the budgeting processes in healthcare have lagged other sectors, especiall...

Q: Big data is a term that describes the large volume of raw

Big data is a term that describes the large volume of raw data, both structured and unstructured, that inundates a business on a daily basis. It includes information such as email messages, social...

Q: Although the apex of ZBB’s popularity in the late 1970s is long

Although the apex of ZBB’s popularity in the late 1970s is long past, there has been renewed interest in ZBB in today’s environment of fiscal constraint, says Shayne Kavanagh in an article published...

Q: It appears that most firms benefit from having a budget in place

It appears that most firms benefit from having a budget in place, to allow them to use their limited resources in the most optimal manner possible in pursuit of their strategic objectives. However, th...

Q: Chartered Institute of Management Accountants (CIMA)/Chartered Global Management Accountants

Chartered Institute of Management Accountants (CIMA)/Chartered Global Management Accountants (CGMA) Activities and skills of management accounting Management accounting combines accounting, finance an...

Q: Corporation tax only plays a role in capital budgeting because of capital

Corporation tax only plays a role in capital budgeting because of capital allowances.’ Do you agree? Explain.

Q: Cite three benefits companies report from using an activity-based budgeting

Cite three benefits companies report from using an activity-based budgeting approach.

Q: Outline three criticisms of traditional budgeting and a related proposal for change

Outline three criticisms of traditional budgeting and a related proposal for change.

Q: Nyborg Supermarkets has a kaizen (continuous improvement) approach to budgeting

Nyborg Supermarkets has a kaizen (continuous improvement) approach to budgeting monthly activity area costs for each month of 2018. February’s budgeted cost driver rate is 0.998 times the budgeted Jan...

Q: Introduction Jack Watson, an electrical engineer, established Electronic Boards plc

Introduction Jack Watson, an electrical engineer, established Electronic Boards plc as a ‘one-man’ company in the late 1970s. From small beginnings, the company ea...

Q: The case was prepared as the basis for discussion rather than to

The case was prepared as the basis for discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Danfoss Drives A/S is a Danish producer of frequenc...

Q: Southern Paper Inc. is a global packaging company headquartered in the

Southern Paper Inc. is a global packaging company headquartered in the US. The company was founded in the 1880s and has three principal business sectors – forest products, packaging and papers. The...

Q: Airport Complex was founded in Northern Europe in the early 1960s,

Airport Complex was founded in Northern Europe in the early 1960s, and at the time it primarily served as a domestic airport. During the 1980s, flights to foreign destinations became an ever more vit...

Q: In November 2020, a consultant was employed to review and document

In November 2020, a consultant was employed to review and document the planning and control systems of Integrated Technology Services (UK) Ltd (ITS-UK), to ensure that these were effectively meeting t...

Q: Springbok Limited’s budget committee, which had members drawn from all the

Springbok Limited’s budget committee, which had members drawn from all the major functions of the business was meeting to consider the projected income statement 2020/2021, which was...

Q: Toyota Motor Company is expanding the production of their gas-electric

Toyota Motor Company is expanding the production of their gas-electric hybrid drive systems and plans to shift production in the United States. To enable the expansion, they are contemplating investin...

Q: You have just been hired by Internal Business Machines Corporation (IBM

You have just been hired by Internal Business Machines Corporation (IBM) in their capital budgeting division. Your first assignment is to determine the free cash flows and NPV of a proposed new type o...

Q: With your help, Dave and Sharon Sampson have now established a

With your help, Dave and Sharon Sampson have now established a financial plan. Among their key financial planning decisions were the following: • Budgeting. They decided to revise their budget to make...

Q: McGuire Industries prepares budgets to help manage the company. McGuire is

McGuire Industries prepares budgets to help manage the company. McGuire is budgeting for the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, sales totaled $9,20...

Q: Ricky’s Convenience Stores’ income statement for the year ended December 31,

Ricky’s Convenience Stores’ income statement for the year ended December 31, 2017, and its balance sheet as of December 31, 2017, are as follows: The business is...

Q: Eddie’s Convenience Stores’ income statement for A1 the year ended December 31

Eddie’s Convenience Stores’ income statement for A1 the year ended December 31, 2017, and its balance sheet as of December 31, 2017, are as follows: The business is...

Q: Spicer Industries prepares budgets to help manage the company. Spicer is

Spicer Industries prepares budgets to help manage the company. Spicer is budgeting for the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, sales totaled $9,700...

Q: Interview an accountant at a local business, nonprofit organization, or

Interview an accountant at a local business, nonprofit organization, or government entity. How does the firm use budgets? How does budgeting help managers plan business activities? How does budgeting...

Q: Ellis Island Tropical Tea manufactures and sells tea. Founder Nailah Ellis

Ellis Island Tropical Tea manufactures and sells tea. Founder Nailah Ellis-Brown stresses the importance of planning and budgeting for business success. Required 1. How can budgeting help Nailah effi...

Q: Match the definitions 1 through 6 with the phrase a through f

Match the definitions 1 through 6 with the phrase a through f. 1. Helps determine financing needs. 2. The usual starting point in the master budget process. 3. A report that shows predicted revenues a...

Q: For each of the following indicate yes if the item is an

For each of the following indicate yes if the item is an important budgeting guideline or no if it is not. 1. Employees should have the opportunity to explain differences from budgeted amounts. 2. Bud...

Q: For each of the following indicate yes if it describes a potential

For each of the following indicate yes if it describes a potential benefit of budgeting or no if it describes a potential negative outcome of budgeting. 1. Budgets help coordinate activities across de...

Q: Explain how the budgeting process for service companies differs from that for

Explain how the budgeting process for service companies differs from that for manufacturers.

Q: Certified Management Accountants must understand budgeting. Access the Institute of Management

Certified Management Accountants must understand budgeting. Access the Institute of Management Accountants website (imanet.org), click on the “CMA Certification” tab, and select “Taking the Exam.” Scr...

Q: Solve the linear programming model formulated in Problem 29 for Xara Stores

Solve the linear programming model formulated in Problem 29 for Xara Stores graphically and by using the computer. a. If the Chinese supplier were able to reduce its percentage of defective pairs of j...

Q: After Susan Wong graduated from State University with a degree in management

After Susan Wong graduated from State University with a degree in management science, she went to work for a computer systems development firm in the Washington, DC, area. As a student at State, S...

Q: The Oakdale County School Board was meeting in special session. A

The Oakdale County School Board was meeting in special session. A federal judge had ordered the board to present an acceptable busing plan for racially balancing the four high schools in Oakdale Count...

Q: Companies often voluntarily provide non-GAAP earnings when they announce annual

Companies often voluntarily provide non-GAAP earnings when they announce annual or quarterly earnings. These numbers are controversial as they represent management’s view of permanen...

Q: How far do you think that short budget forecasts would be more

How far do you think that short budget forecasts would be more useful than budgets tied in with the traditional annual financial reporting system? Answer: 1. This question requires a discussion o...

Q: The Head of Department of Business and Management at Birch College has

The Head of Department of Business and Management at Birch College has been told by the Vice Principal (Resources) that his departmental budget for the next academic year is £150,000. What comment wou...

Q: Avsar Limited has extracted the following budgeting details for the year to

Avsar Limited has extracted the following budgeting details for the year to 30 September 2020: 1 Sales: 4000 units of V at £500 per unit7000 units of R at £300 per unit 2 Mat...

Q: What is capital budgeting? Why are capital budgeting decisions crucial to

What is capital budgeting? Why are capital budgeting decisions crucial to the long-run financial health of a business enterprise?

Q: What is the major shortcoming of using the payback period as the

What is the major shortcoming of using the payback period as the only criterion in making capital budgeting decisions?

Q: Renaldo’s Boutiques, Inc., has 14 stores located in a Midwestern

Renaldo’s Boutiques, Inc., has 14 stores located in a Midwestern part of the United States. Renaldo, the president of the company, has set budgets for each store that do not allow for lost, stolen, or...

Q: Cheri Standish, the controller at Harmonics International, overheard the following

Cheri Standish, the controller at Harmonics International, overheard the following conversation among two of her product line department heads, Bob, manager of Pianos and Keyboards, and Fran, manager...

Q: Many managers complain about the budgeting process. They claim it takes

Many managers complain about the budgeting process. They claim it takes too long, requires too much management time, encourages managers to “pad the budget” because of uncertainties, and creates unnec...

Q: Frequently, the disadvantages of budgeting are not discussed in textbooks.

Frequently, the disadvantages of budgeting are not discussed in textbooks. Go to the website www.strategiccontrol.24xls.com/en211. What dysfunctional aspects of budgeting are highlighted by the author...

Q: What is a flexible budget? Explain how a flexible budget increases

What is a flexible budget? Explain how a flexible budget increases the usefulness of budgeting as a means of evaluating performance.

Q: An investment center in Shellforth Corporation was asked to identify three proposals

An investment center in Shellforth Corporation was asked to identify three proposals for its capital budget. Details of those proposals are as follows. Shellforth uses residual income to evaluate all...

Q: The division managers of Chester Construction Corporation submit capital investment proposals each

The division managers of Chester Construction Corporation submit capital investment proposals each year for evaluation at the corporate level. Typically, the total dollar amount requested by the divis...

Q: The purpose of this problem is to demonstrate some of the interrelationships

The purpose of this problem is to demonstrate some of the interrelationships in the budgeting process. Shown as follows is a very simple balance sheet at January 1, along with a simple budgeted income...

Q: The importance of cash budgets for all types of businesses and individuals

The importance of cash budgets for all types of businesses and individuals cannot be overemphasized. The following six steps to cash flow control are critical. 1. Create a monthly cash flow budget. De...

Q: Working in small groups, view the following master budgeting video:

Working in small groups, view the following master budgeting video: https://www.youtube.com/watch?v=Wy9MGFjS7ZA Instructions: a. What does the video identify as three primary outputs of the master bu...

Q: Under the Public Company Accounting Oversight Board (PCAOB) procedures,

Under the Public Company Accounting Oversight Board (PCAOB) procedures, companies are required to disclose “material weaknesses” in their internal controls. A material weakness means a company’s defic...

Q: Red Robin Gourmet Burgers is an upscale restaurant chain founded in the

Red Robin Gourmet Burgers is an upscale restaurant chain founded in the Pacific Northwest. The chain’s former chairman, Michael Snyder, encouraged employees to be “unbridled”? in everything they did....

Q: Budgets are essential for the successful operation of an organization. Finding

Budgets are essential for the successful operation of an organization. Finding the resources to implement budget goals requires extensive use of human resources. How managers perceive their roles in t...

Q: Individuals generally do not prepare statements of cash flows concerning their personal

Individuals generally do not prepare statements of cash flows concerning their personal activities. But they do engage in cash budgeting—if not on paper, then at least in their heads...

Q: You have overheard the following statements: (a) ‘

You have overheard the following statements: (a) ‘A budget is a forecast of what is expected to happen in a business during the next year.’ (b) ‘Monthly budgets must be prepared with a column for ea...

Q: Because Ben Holt, Blades’ chief financial officer, believes the growth

Because Ben Holt, Blades’ chief financial officer, believes the growth potential for the roller blades market in Thailand is very high, he has decided to invest in Thailand. This investment would invo...

Q: Jim Logan, owner of the Sports Exports Company, has been

Jim Logan, owner of the Sports Exports Company, has been pleased with his success in the United Kingdom. He began his business by producing footballs and exporting them to the United Kingdom. Although...

Q: Recently, Ben Holt, Blades’ chief financial officer, has assessed

Recently, Ben Holt, Blades’ chief financial officer, has assessed whether it would be more beneficial for Blades to establish a subsidiary in Thailand to manufacture roller blades or to acquire an exi...

Q: Recall that Blades has tentatively decided to establish a subsidiary in Thailand

Recall that Blades has tentatively decided to establish a subsidiary in Thailand to manufacture roller blades. The new plant will be utilized to produce Speedos, Blades’ primary product. Once the subs...

Q: Why should capital budgeting for subsidiary projects be assessed from the parent’s

Why should capital budgeting for subsidiary projects be assessed from the parent’s perspective? Which additional factors that normally are not relevant for a purely domestic project deserve considerat...

Q: Santa Monica Co., a U.S.-based MNC,

Santa Monica Co., a U.S.-based MNC, was considering establishing a consumer products division in Germany, which would be financed by German banks. Santa Monica completed its capital budgeting analysis...

Q: Assume that a less developed country called LDC encourages direct foreign investment

Assume that a less developed country called LDC encourages direct foreign investment (DFI) in an effort to reduce its unemployment rate, currently at 15 percent. Also assume that several MNCs are like...

Q: PepsiCo recently decided to invest more than $300 million for expansion

PepsiCo recently decided to invest more than $300 million for expansion in Brazil. Brazil offers considerable potential because it has 150 million people and their demand for soft drinks is increasing...

Q: What is the major limitation of using point estimates of exchange rates

What is the major limitation of using point estimates of exchange rates in the capital budgeting analysis? List the various techniques for adjusting risk in multinational capital budgeting. Describe a...

Q: Assume that Nike decides to build a shoe factory in Brazil;

Assume that Nike decides to build a shoe factory in Brazil; half the initial outlay will be funded by the parent’s equity and half by borrowing funds in Brazil. Assume that Nike wants to assess the pr...

Q: Using the capital budgeting framework discussed in this chapter, explain the

Using the capital budgeting framework discussed in this chapter, explain the sources of uncertainty surrounding a proposed project in Hungary being considered by a U.S. firm. In what ways is the estim...

Q: Ethridge Co. of Atlanta, Georgia, has a subsidiary in

Ethridge Co. of Atlanta, Georgia, has a subsidiary in India that produces products and sells them throughout Asia. In response to the September 11, 2001, terrorist attacks on the United States, Ethrid...

Q: Explain how the capital budgeting analysis in question 16 would need to

Explain how the capital budgeting analysis in question 16 would need to be adjusted if there were three possible outcomes for the British pound along with the possible outcomes for the British economy...

Q: Recently, Best Bargain Co., a U.S.-based

Recently, Best Bargain Co., a U.S.-based retailer, decided to consider expanding into various foreign countries; it applied a comprehensive country risk analysis before making its expansion decisions....

Q: Monk, Inc., is considering a capital budgeting project in Tunisia

Monk, Inc., is considering a capital budgeting project in Tunisia. The project requires an initial outlay of 1 million Tunisian dinars; the dinar is currently valued at $0.70. In the first and second...

Q: If the potential return is high enough, any degree of country

If the potential return is high enough, any degree of country risk can be tolerated. Do you agree with this statement? Why or why not? Do you think that a proper country risk analysis can replace a ca...

Q: Gandor Co. is a U.S. firm that is

Gandor Co. is a U.S. firm that is considering a joint venture with a Chinese firm to produce and sell DVDs. Gandor will invest $12 million in this project, which will help finance the Chinese firm&aci...

Q: 14. Durham Prints Ltd manufactures a single product that has the

14. Durham Prints Ltd manufactures a single product that has the following standard cost specifications (per unit). During June, the following actual data have been recorded in the production of 2,000...

Q: 21. Three general types of capital budgeting models are:

21. Three general types of capital budgeting models are: (a) Net present value declining balance and accounting rate of return (b) Payback, internal rate of return and units of production (c) Accou...

Q: Sharon Glessing, controller for Janson Company, has noticed that the

Sharon Glessing, controller for Janson Company, has noticed that the company faces a 75 percent learning rate for its specialty design line. In planning the cost of the latest design, Sharon assumed t...

Q: Shirrell Blackthorn is the accountant for several pizza restaurants based in a

Shirrell Blackthorn is the accountant for several pizza restaurants based in a tri-city area. The president of the chain wanted some help with budgeting and cost control, so Shirrell decided to analyz...

Q: Video-Forward, Inc., designs and manufactures wearable video cameras

Video-Forward, Inc., designs and manufactures wearable video cameras. Models A-1, A-2, and A-3 are lightweight video cameras that can be used on arms and headbands. Models A-4 and A-5 have larger memo...

Q: LeeAnn Ortiz owns a retail store that sells new and used sporting

LeeAnn Ortiz owns a retail store that sells new and used sporting equipment. LeeAnn has requested a cash budget for October. After examining the records of the company, you find the following: a. Cash...

Q: Samson Company produces paper towels. The company has established the following

Samson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels: Paper pulp (4 lbs. @ $0.30) $ 1.20 Labor (1.8...

Q: Mason, Durant, and Santos (MDS) is a tax

Mason, Durant, and Santos (MDS) is a tax services firm. The firm is located in Oklahoma City and employs 15 professionals and eight staff. The firm does tax work for small businesses and well-to-do in...

Q: The Lockit Company manufactures door knobs for residential homes and apartments.

The Lockit Company manufactures door knobs for residential homes and apartments. Lockit is considering the use of simple (single-driver) and multiple regression analyses to forecast annual sales becau...

Q: Ponderosa, Inc., produces wiring harness assemblies used in the production

Ponderosa, Inc., produces wiring harness assemblies used in the production of semi-trailer trucks. The wiring harness assemblies are sold to various truck manufacturers around the world. Projected sal...

Q: An effective budget converts the goals and objectives of an organization into

An effective budget converts the goals and objectives of an organization into data. The budget serves as a blueprint for management’s plans. The budget is also the basis for control. Management perfor...

Q: Norton Company, a manufacturer of infant furniture and carriages, is

Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages of preparing the annual budget for the coming year. Scott Ford has recently joined Norton’s accounting staff...

Q: Douglas Davis, controller for Marston, Inc., prepared the following

Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct la...

Q: Heaps Company produces jewelry that requires electroplating with gold, silver,

Heaps Company produces jewelry that requires electroplating with gold, silver, and other valuable metals. Electroplating uses large amounts of water and chemicals, producing wastewater with a number o...

Q: Barbara Harvey is angry with Martin Cochran. He is behind schedule

Barbara Harvey is angry with Martin Cochran. He is behind schedule developing supporting material for tomorrow’s capital budget committee meeting. When she approached him about his apparent lackadaisi...

Q: Teresa Flanagan, the accountant, is a perfectionist. No one

Teresa Flanagan, the accountant, is a perfectionist. No one can do the job as well as she can. Indeed, she has found budget information provided by the various departments to be worthless. She must ch...

Q: Eric Lane, the controller of Harrison Industries, is very popular

Eric Lane, the controller of Harrison Industries, is very popular. He is easygoing and does not offend anybody. To develop the company’s most recent budget, Mr. Lane first asked all department manager...

Q: Maria Gutierrez and Devin Cuncan recently graduated from the same university.

Maria Gutierrez and Devin Cuncan recently graduated from the same university. After graduation they decided not to seek jobs at established organizations but, rather, to start their own small business...

Q: The Curious Accountant in this chapter discussed some of the budgeting issues

The Curious Accountant in this chapter discussed some of the budgeting issues facing the United States Olympic and Paralympic Committee (USOPC). First, to get a basic understanding of the sources of r...

Q: Clarence Cleaver is the budget director for the Harris County School District

Clarence Cleaver is the budget director for the Harris County School District. Mr. Cleaver recently sent an urgent e-mail message to Sally Simmons, principal of West Harris County High. The message se...

Q: Amherst Corporation has three divisions, each operating as a responsibility center

Amherst Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to...

Q: Webb Publishing Company is evaluating two investment opportunities. One is to

Webb Publishing Company is evaluating two investment opportunities. One is to purchase an Internet company with the capacity to open new marketing channels through which Webb can sell its books. This...

Q: Melissa Putnam, the director of Kelso Corporation’s Mail-Order Division

Melissa Putnam, the director of Kelso Corporation’s Mail-Order Division, is preparing the division’s budget proposal for next year. The company’s...

Q: Mankota Company’s purchasing manager, Fernando Garza, is preparing a purchases

Mankota Company’s purchasing manager, Fernando Garza, is preparing a purchases budget for the next quarter. At his request, Ruben Carpenter, the manager of the sales department, forw...

Q: What is the link between flexible budgeting and management control?

What is the link between flexible budgeting and management control?

Q: Equipment is a specialty nozzle. The budgeting team is now determining

Equipment is a specialty nozzle. The budgeting team is now determining the purchase requirements and monthly cash disbursements for this part. Eliot wishes to have in stock enough nozzles to use for t...

Q: What are the advantages and disadvantages of starting the budgeting process early

What are the advantages and disadvantages of starting the budgeting process early in the year versus later in the year prior to the budget year?

Q: The director of marketing for Marbud Hardware is responsible for, among

The director of marketing for Marbud Hardware is responsible for, among other things, identifying new geographic regions for the company to enter. As part of the company’s zero-based...

Q: Fargo Industries manufactures and sells snowmobiles. The company has eight business

Fargo Industries manufactures and sells snowmobiles. The company has eight business units strategically located near the major markets, each with a sales force and two to four manufacturing plants. Th...

Q: Oakley Wholesale Hardware and Supplies (OWHS) sells tools, lumber

Oakley Wholesale Hardware and Supplies (OWHS) sells tools, lumber, and other remodeling supplies to commercial contractors. The company controller is compiling cash and other budget information for Ju...

Q: Refer to the data in Exercise 13-51. Recent economic

Refer to the data in Exercise 13-51. Recent economic events in the local area have led the owner of Lamphere Lawncare to revise some estimates in budgeting the operating income for the following year....

Q: Earle Soup Company makes three varieties of soups: Bean, Tomato

Earle Soup Company makes three varieties of soups: Bean, Tomato, and Vegetable. Sales volume for the annual budget is determined by estimating the total market volume for soups and then applying the c...

Q: Consider the Business Application “Recent Experiences with Zero-Based Budgeting

Consider the Business Application “Recent Experiences with Zero-Based Budgeting. According to the Application, the company Kraft Heinz intends to keep using zero-based budgeting while other firms in t...

Q: Would the budgeting plans for a company that uses a just-

Would the budgeting plans for a company that uses a just-in-time (JIT) inventory system be different from those for a company that does not? Why?

Q: In some organizations (firms, universities, government agencies), spending

In some organizations (firms, universities, government agencies), spending appears to increase as the end of the budgeting period approaches, even if there are no seasonal differences. What might caus...

Q: Describe four methods used to estimate sales for budgeting purposes.

Describe four methods used to estimate sales for budgeting purposes.

Q: Refer to the information in Exhibits 13.20 and 13.

Refer to the information in Exhibits 13.20 and 13.21 that are part of the test of zero-based budgeting at Rainy Days Umbrellas. Information concerning the funding requests for PDG Areas 2 and 3 are as...

Q: Raynor Testing Services (RTS) is a new company that has

Raynor Testing Services (RTS) is a new company that has not yet developed a formal planning and budgeting process. RTS is unsure how to proceed. It understands that the following five steps need to be...

Q: What role does the master budget play in the planning and budgeting

What role does the master budget play in the planning and budgeting exercise?

Q: Fassbender Industries tracks the annual sales from each of its six divisions

Fassbender Industries tracks the annual sales from each of its six divisions to help evaluate performance and plan budgeting for the following year. Calculate the market share (divisional share) for e...

Q: Fassbender Industries tracks the annual sales from each of its six divisions

Fassbender Industries tracks the annual sales from each of its six divisions to help evaluate performance and plan budgeting for the following year. Calculate the market growth (divisional growth) for...

Q: Tina is an audit manager with a national public accounting firm and

Tina is an audit manager with a national public accounting firm and one of her clients is Simply Steam, Co. Simply Steam provides industrial and domestic carpet steam-cleaning services. This is the fi...

Q: How might Visa executives use scenario planning in the budgeting process?

How might Visa executives use scenario planning in the budgeting process?

Q: What types of investments and expenditures are typically considered in the capital

What types of investments and expenditures are typically considered in the capital budgeting process?

Q: Describe the budgeting process, three major budgeting challenges, and the

Describe the budgeting process, three major budgeting challenges, and the four major types of budgets. (1) What are some of the risks of failing to create and manage budgets? (2) How does zero-based b...

Q: In the capital budgeting model in Figure 6.5, we

In the capital budgeting model in Figure 6.5, we supplied the NPV for each investment. Suppose instead that you are given only the streams of cash inflows from each investment. This file also shows th...

Q: The models in this chapter are often called combinatorial models because each

The models in this chapter are often called combinatorial models because each solution is a combination of the various 0–1 values, and only a finite number of such combinations exist. For the capital...

Q: Solve the problem 1 using the input data in the file P06

Solve the problem 1 using the input data in the file P06_02.xlsx. Data from Problem 1: In the capital budgeting model in Figure 6.5, we supplied the NPV for each investment. Suppose instead that you...

Q: Solve the following modifications of the capital budgeting model. a

Solve the following modifications of the capital budgeting model. a. Suppose that at most two of projects 3, 5, and 6 can be selected. b. Suppose that if investment 5 is selected, then investment 1 mu...

Q: In the capital budgeting model, investment 4 is tied for the

In the capital budgeting model, investment 4 is tied for the largest ROI, but it is not selected in the optimal solution. How much NPV will be lost if Tatham is forced to select investment 4? Answer b...

Q: As it currently stands, investment 7 in the capital budgeting model

As it currently stands, investment 7 in the capital budgeting model has the lowest ROI. Keeping this same ROI, can you change the cash requirement and NPV for investment 7 so that it is selected in th...

Q: Change the capital budgeting model so that 80% of each cost

Change the capital budgeting model so that 80% of each cost in row 5 is incurred right now, at the beginning of year 1, and the other 20% is incurred a year from now, at the beginning of year 2. You c...

Q: Expand and then solve the capital budgeting model so that 20 investments

Expand and then solve the capital budgeting model so that 20 investments are now possible. You can make up the data on cash requirements, NPVs, and the budget, but use the following guidelines: ■ The...

Q: Eastern Cola is considering the purchase of a special-purpose bottling

Eastern Cola is considering the purchase of a special-purpose bottling machine for $70,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates...

Q: Lulus Construction is analyzing its capital expenditure proposals for the purchase of

Lulus Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $12,000,000 for the year. Lyssa Bickerson, staff an...

Q: Captain Inc. is considering the purchase of new equipment that will

Captain Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Captain made the following estimates related to the new machinery: Assume depreciat...

Q: Woodechuck’s manufactures, among other things, jerseys for the girls’ football

Woodechuck’s manufactures, among other things, jerseys for the girls’ football teams in two high schools in Australia. The company uses fabric to create the jerseys...

Q: Angler Chemical Company currently operates three manufacturing plants in Colorado, Utah

Angler Chemical Company currently operates three manufacturing plants in Colorado, Utah, and Arizona. Annual carbon emissions for these plants in the first quarter of 2021 are140,000 metric tons per q...

Q: Unicorn Freightways is a leader in transporting agricultural products in the western

Unicorn Freightways is a leader in transporting agricultural products in the western provinces of Italy. Rita Bonnie, a financial analyst at Unicorn Freightways, is studying the behavior of transporta...

Q: While many reports do recognize the advantage of an out- comes

While many reports do recognize the advantage of an out- comes focus in government, often public bodies concentrate on individual outputs. Many agencies are still working on short-term or annual plann...

Q: Johnny Buster owns Entertainment World, a place that combines fast food

Johnny Buster owns Entertainment World, a place that combines fast food, innovative beverages, and arcade games. Worried about the shift- ing tastes of younger audiences, Johnny contemplates bringing...

Q: Shalie Manufacturing makes several thousand different metal products, including building materials

Shalie Manufacturing makes several thousand different metal products, including building materials, tools, and furniture parts. The manager of the furniture parts division has proposed that his divisi...

Q: What are some additional considerations when budgeting in multinational companies?

What are some additional considerations when budgeting in multinational companies?

Q: The Jerico store of Jiffy Mart, a chain of small neighborhood

The Jerico store of Jiffy Mart, a chain of small neighborhood convenience stores, is preparing its activity-based budget for January 2021. Jiffy Mart has three product categories: soft drinks (35% of...

Q: Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting

Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2021. Each successive month, the budgeted cost-driver rate decreases by 0.4% relative to...

Q: Military hardware should be accounted for as a. Stewardship assets

Military hardware should be accounted for as a. Stewardship assets b. Heritage assets c. National defense assets d. General assets 2 . The Executive Office Building has historical significance yet is...

Q: Capital budgeting analysis involves the use of many estimates. Required

Capital budgeting analysis involves the use of many estimates. Required: For each of the following estimation errors, state whether the net present value of the project will be too high or too low: a....

Q: National Leasing is evaluating the cost of capital to use in its

National Leasing is evaluating the cost of capital to use in its capital budgeting process. Over the recent past, the company has averaged a return on equity of 13% and a return on investment of 10%....

Q: A task force of capital budgeting analysts at Morrison Ltd. collected

A task force of capital budgeting analysts at Morrison Ltd. collected the following data concerning the drilling and production of known petroleum reserves at an offshore location: Required: a. Calcul...

Q: The Office of Management and Budget (OMB) provides access to

The Office of Management and Budget (OMB) provides access to the budget of the United States government through the Discover U.S. Government Information website at www.govinfo.gov. At this site, you w...

Q: Form a group of three or four students to research, evaluate

Form a group of three or four students to research, evaluate, and report on software solutions available to support the budgeting needs of an organization. Choose three planning/budgeting products fro...

Q: One of the significant costs for a nonpublic college or university is

One of the significant costs for a nonpublic college or university is student aid in the form of gifts and grants awarded to students because of academic potential or performance, and/or financial nee...

Q: The Consortium for Advanced Manufacturing—International (CAM-I)

The Consortium for Advanced Manufacturing—International (CAM-I) is an international consortium of companies, consultancies, and academics that have elected to work cooperatively in a precompetitive en...

Q: The following data have been collected by capital budgeting analysts at Sunset

The following data have been collected by capital budgeting analysts at Sunset Beach Inc. concerning an investment in an expansion of the company’s product line. Analysts estimate th...