Posted: April 26th, 2016
11. An important reason for imposing a minimum cash balance in the cash budget is:
A. it provides a cushion that can absorb forecast errors.
B. it provides extra funds for managers to spend.
C. it makes the balance sheet look better.
D. all of the above.
12. In order to calculate the net present value of a proposed investment, it is necessary to know:
A. the cash flows expected from the investment.
B. the net income expected from the investment.
C. the interest rate paid on funds borrowed to make the investment.
D. the cash dividends paid on the stock each year.
13. When analyzing end of period production cost variances, which of the following product cost components will not need “flexing”?
A. direct material.
B. direct labor.
C. variable manufacturing overhead.
D. fixed manufacturing overhead.
14. The operating expense budget is based on the:
A. sales budget.
B. production budget.
C. manufacturing overhead budget.
D. cash budget.
15. Sometimes when management decisions are reached the investment project with the highest NPV or IRR is not selected. This occurs because:
A. a lower IRR is a less risky investment.
B. the highest NPV is not necessarily the highest IRR.
C. qualitative factors override quantitative analysis techniques.
D. sometimes management makes the wrong decision.
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