With the ARR method, if there is a trade-in value of the asset, that value is deducted from initial investment (before dividing by two) to arrive at average investment.

Group of answer choices

True

False

Flag question: Question 2

Question 2

3pts

With incremental budgeting, budgets are automatically increased each year by the rate of inflation.

Group of answer choices

True

False

Flag question: Question 3

Question 3

3pts

Both the payback period and the ARR methods ignore the time value of cash flows.

Group of answer choices

True

False

Flag question: Question 4

Question 4

3pts

Moving average averages overnperiods to minimize random variation.

Group of answer choices

True

False

Flag question: Question 5

Question 5

3pts

Variance analysis is a method of analyzing the differences between budgeted figures and actual results.

Group of answer choices

True

False

Flag question: Question 6

Question 6

3pts

If both NPV and IRR are used to evaluate various alternative investments, their ranking of these investments will always be identical.

Group of answer choices

True

False

Flag question: Question 7

Question 7

3pts

An advantage of zero-based budgeting (ZBB) is that it concentrates on the dollar cost of each department's activities and budget and not on broad percentage increases.

Group of answer choices

True

False

Flag question: Question 8

Question 8

3pts

In considering the operating leasing of an asset using discounted cash flow, the depreciation method selected will affect the calculations.

Group of answer choices

True

False

Flag question: Question 9

Question 9

3pts

A restaurant plans to keep its advertising budget at the same amount as last year. This is a form of ZBB.

Group of answer choices

True

False

Flag question: Question 10

Question 10

3pts

A flexible budget is one:

Group of answer choices

That is not part of the master budget.

That can be changed by a general manager after preparation by a department.

That it is prepared for several possible levels of sales revenue.

That includes only variable costs.

Flag question: Question 11

Question 11

3pts

Which of the following is not true of ZBB?

Group of answer choices

It takes less time, effort, and paperwork than incremental budgeting.

It obliges managers to identify inefficient or obsolete functions within their areas of responsibility.

It can reallocate funds to the departments providing the greatest benefit to the organization.

It can identify areas of overlap or duplication.

Flag question: Question 12

Question 12

3pts

Purchasing is always preferable to leasing an asset because:

Group of answer choices

None of the above statements are necessarily correct.

by purchasing and owning the asset, one can claim depreciation expense in excess of rental expense and thus reduce income tax.

pride of ownership by purchasing and owning is more important than showing rental cost as an expense.

the asset will have a trade-in value at the end of its useful life.

Flag question: Question 13

Question 13

3pts

One of the criticisms of the ARR method is that it:

Group of answer choices

gives results that are not as satisfactory as the payback period method.

does not allow two comparable investments to be considered at the same time.

ignores the eventual trade-in value of the asset.

ignores the timing of net income.

Flag question: Question 14

Question 14

3pts

If the total present value of a 5-year investment using NPV and a 15% rate is $82,300, and the initial investment is $100,000, one should:

Group of answer choices

Determine the IRR and decide if one would be satisfied with that rate under the circumstances.

Use the payback period and ARR methods to help make the decision.

Not invest because NPV is negative.

Not invest because in times of inflation 15% is not a high enough interest rate.

Flag question: Question 15

Question 15

3pts

A capital budget is one:

Group of answer choices

related to balance sheet items.

that plans for current assets.

complied from all other budgets.

prepared at the head office.

Flag question: Question 16

Question 16

3pts

When departmental budgets are increased each year by a flat percentage rate, this is known as:

Group of answer choices

ZBB

inflationary budgeting.

incidental budgeting.

incremental budgeting

Flag question: Question 17

Question 17

3pts

The NPV method has an advantage over the payback period and ARR methods because:

Group of answer choices

the forecasts of sales revenue and expenses are more accurate.

it allows one to ignore any non-monetary factors.

it uses discounted cash flow factors compiled by computer.

it takes into account the timing of cash inflows and outflows.