Midterm Examination for MAS 5 45.

Bulan Company is planning to purchase a new

machine. The payback period is estimated to be 6
27. Assume that a firm has accurately calculated
years, the projects after tax cash flow is estimated
the net cash flows relating to two mutually
to be P 2,000 yearly for the first three years and
exclusive investment proposals. If the net present
P3,000 yearly for the next three years of the
value of both proposals exceed zero and the firm is
payback period. Annual depreciation of P 1,300
not under the constraint of capital rationing, then
will be charged to income for each of the 6 years
the firm should
of the payback period. The machine will cost:
a) calculate the payback periods to make certain
a) 12,000
that the initial cash outlays can be recovered
b) 9,000 
within a appropriate period of time 
c) 6,000 
b) compare the profitability index of these
d) 15,000 
investments to those of other possible
investments  30. In the preparation of a cash budget with clear-
c) calculate the IRRs of these investments to be cut information on sources and uses of funds, all of
certain that the IRRS are greater than the cost the following would classified as a cash flow under
of capital  financing activities, except:
d) accept the proposal that has the largest NPV
since the goal of the firm is to maximize a) The sale of the company's own preferred stock
shareholder wealth and, since the projects are for cash 
mutually exclusive, we can only take one  b) The repayment of principal on a mortgage 
c) The declaration and payment of a cash
42. Which of the following sources of funds for dividend on the company's own common stock 
capital investment involves a tax adjustment to d) The conversion of the company's own bond
determine the cost of capital? liability into common stock 
a) Retained profits  31. The master budget process usually begins with 
b) Issuing debt 
c) Issuing common stock  a) Sales budget 
d) All of the above involve a tax adjustment.  b) Production budget 
c) Dinansial budaat 
43. Which one of the following schedules would
be the last item to be prepared in the normal 29. A firm is considering three investment projects
budget preparation process? which we will refer to as A, B, and C. Each project
has an initial cost of $10 million. Investment A
a) Manufacturing overhead budget  offers an expected rate of return of 16%, B of 8%,
b) Cost of goods sold budget  and C of 12%. The firm's cost of capital is 6% if it
c) Cash budget  borrows $10 million, 10% if it borrows $20
d) Direct labor budget  million, and 15% if it borrows $30 million. Which
project(s) should the firm invest in? 
46. South Dakota Company budgets sales of
22,000 units for January, 30,000 for February. The a) Just A, because it offers the highest rate of
budgeted beginning inventory for January 1 was return and is the only investment that has a rate
7,000 units. South Dakota desires an ending of return higher than 15% 
inventory equal to one-half of the following b) All three should be undertaken, because the
month's sales needs. Budgeted production for rate of return on B is above 6%, on C is above
January is 10%, and on A is above 15%. 
c) Only A and C should be undertaken because
a) 14,000 units 
both have rates of return that are greater than
b) 30,000 units 
10%. 
c) 37,000 units 
d) None of the above is correct. 
d) 26,000 units 
34. Which of the following statements is incorrect
47. What is your name? * 
regarding a normal project?
Raecielyn I. Gagar 
a) If the IRR of a project is 8%, its NPV, using a
discount rate, k, greater than 8%, will be less
than 0. 
b) If the Pl of a project equals 0, then the project's
initial cash outflow equals the PV of its cash
flows. 
c) If the NPV of a project is greater than O, then
its PI will exceed 1. 
d) If the IRR of a project is greater than the 28. Florida Co, manufacturers June, 1,200; July,
discount rate, k, then its Pl will be greater than 1,300; August, 1,600. Raw materials purchases in
1.  June would be 
39. A company has prepared a cash budget for a) 2,500 pounds 
January through June of 2019. Which of the b) 2,800 pounds 
following discovered in February 2019, is least c) 1,525 pounds 
likely to require revising the cash budget? d) 3,050 pounds 
a) February sales are lower than budgeted  37. In cases where capital must be rationed, a firm
b) The interest rate on short-term borrowing is should rank projects according to their
higher than budgeted 
a) internal rates of return. 
c) The company increased from 10% to 20% the
b) profitability indexes. 
down payment it requires from customers. 
c) payback periods
d) The company changed inventory methods from
d) net present values. 
FIFO to weighted average. 
38. The LMN Corporation is considering an
35. Michigan Merchandising is preparing its cash
investment that will cost $80,000 and have a useful
budget for January 2019 and made the following
life of 4 years. During the first 2 years, the net
projections: Sales P 1,500,000; Gross Profit rate
incremental after-tax cash flows are $25,000 per
25%; Decrease in Inventories P 70,000; Decrease
year and for the last two years they are $20,000 per
in Accounts Payable for Inventories P 120,000 For
year. What is the payback period for this
January 2019, what were the estimated cash
investment?
disbursements for inventories?
a) 2 years 
a) P 1,055,000 
b) 3.5 years 
b) P 935,000 
c) 3.2 years 
c) P 1,175,000 
d) 4 years 
d) P1,050,000 
26. The net present value method and the internal
36. Individual budget schedules are prepared to
rate of return method will always yield the same
develop an annual comprehensive or master
decision when
budget. The budget schedule that would provide
the necessary input data for the direct labor budget a) a single project is evaluated. 
would be the b) mutually exclusive projects are evaluated. 
c) a limited number of projects must be selected
a) Production budget 
from a large number of opportunities. 
b) Raw materials purchases budget 
d) All of the above are correct. 
40. Alaska Company has budgeted sales on
33. The Ohio Company has the following
account of P 120,000 for July, P 211,000 for
historical pattern on its credit sales:
August, and P 198,000 for September. Collection
70% collected in the month of sale
experience indicates that 60% of the budgeted
15% collected in the first month after sale
sales will be collected the month after the sale,
10% collected in the second month after sale
36% the second month, and 4% will be
4% collected in the third month after sale
uncollectible. The cash from accounts receivable
1% uncollectible 
that should be budgeted for September would be
The sales on open account have been budgeted for
a) P 198,600  the last six months of 2011 are shown below: 
b) P 197,880  July  60,000
c) P 194,760  August  70,000
d) P 169,800  September 80,000
October  90,000
41. A profitability index (PI) of .92 for a project
November 100,000
means that
December 85,000 
a) the project's NPV is greater than 1  What would be the estimated total cash collections
b) the project returns 92 cents in present value for during the fourth calendar quarter from sales made
each current dollar invested (cost)  on open account during the fourth calendar
quarter?
a) P 172,500
b) P 251,400 
c) P 265,400 
d) P 230,000 
44. Budgets are a necessary component of 25. The information contained in a cost of goods
financial decision making because they provide manufactured budget most directly relates to the
a(n)
a) Materials used, direct labor, overhead applied,
a) Automatic corrective mechanism for errors  and finished goods inventories budgets 
b) Efficient allocation of resources  b) Materials used, direct labor, overhead applied,
c) Means to use all the firm's resources  and work-in-process inventories, and finished
d) Means to check managerial discretion  goods inventories budgets 
c) Materials used, direct labor, overhead applied,
32. The weighted average cost of capital approach
and ending work-in-process 
to decision making is not directly affected by the
d) Materials used, direct labor, overhead applied,
a) Cost of debt outstanding  and work-in-process 
b) Current budget for expansion 
14. Using the concept of 'expected value' in sales
c) Proposed mix of debt, equity, and existing
forecasting means that the sales forecast to be used
funds used to implement the project 
is
d) Value of common stock 
a) Based on expected selling prices of the
22. New Jersey Co. is budgeting sales of 53,000
products 
units of Product A1 for 2010. The manufacture of
b) Based on probabilities 
one unit of A1 requires 4 kilos of chemical Z5.
c) Developed using the indicator method 
During 2010, New Jersey plans to reduce the
d) The sum of the sales expected by individual 
inventory of Z5 by 50,000 kilos and increase the
finished goods inventory of A1 by 6,000 units. 15. Collosus, Inc., has estimated that a proposed
There is no work-in-process inventory. How many project's 10-year annual net cash benefit, received
kilos of Z5 is New Jersey budgeting to purchase in each year end, will be $2,500 with an additional
2010? terminal benefit of $5,000 at the end of the tenth
year. Assume an IRR of 8 percent, calculate the
a) 186,000 
initial cash outlay.
b) 162,000 
c) 238,000  a) $19,090 
d) 138,000  b) $25,000 
c) $30,000 
5. Bulging Stomach Restaurants, Inc., has
estimated that a proposed project's 8-year net cash 6. A company purchases a non-current asset with a
benefit will be $4,000 per year for years 1 through useful economic life of ten years for $1.25 million.
8, with an additional terminal benefit of $8,000 at It is expected to generate cash flows over the ten
the end of the eighth year. Assuming that these year period of $250,000 per annum before
cash inflows satisfy exactly Bulging's required rate depreciation. The company charges depreciation
of return of 8 percent, the project's initial cash over the life of the asset on a straight-line basis. At
outflow is closest to which of the following four the end of the period it will be sold for $250,000.
possible answers? What is the accounting rate of return for the
investment (based on average profits and average
a) $40,000 
investment)?
b) $25,149 
c) $27,309  a) 33% 
d) $14,851  b) 15% 
c) 20% 
24. Which of the following does not consider the
d) 25% 
concept of time value of money
7. A budget can/should do all of the following,
a) Profitability index 
except
b) Net present value 
c) Internal rate of return  a) becomes the performance standard against
d) payback reciprocal  which firms can compare the actual results 
b) help management allocate limited resources 
c) be adjusted if new opportunities becomes
available during the year. 
d) be prepared by managers from different
functional areas working independently of each
others. 
23. Which of the following statements is correct Option 1 
regarding the internal rate of return (IRR)
Option 2 
method? 
13. The cash budget should help to ensure
a) The internal rate of return is rarely used by
firms today because of the ease at which net a) That sufficient cash is available to pay salaries
present value is calculated  and wages, even if it means borrowing the
b) The internal rate of return does not consider the money 
time value of money.  b) That cash dividends can be paid every quarter 
c) As long as you are not dealing with mutually c) Sufficient liquidity without an excess amount
exclusive projects, capital rationing, or unusual of idle cash 
projects having multiple sign changes in the d) That enough cash is on hand at all times to
cash-flow stream, the internal rate of return satisfy maximum cash requirements 
method can be used with
reasonable confidence.  8. New Mexico Company plans to sell 24,000 units
d) Each project has a unique internal rate of of Product A in July and 30,000 units in August.
return.  Sales of Product A during June were 25,000 units.
Past experience has shown that end-of-month
4. You are offered a cash flow of 5 payments of inventory must equal 3,000 units plus 30% of the
$120 per year. The first payment will be made next month's sales. On June 30, this requirement
today, and other payments will follow at one year was met. Based on these data, how many units of
increments. If the discount rate is 4%, what is the Product A must be produced during the month of
present value of this stream of payments (rounded July?
to dollars)? 
a) 22,200 
a) $517 b) 25,800 
b) $555  c) 24,000 
c) $534  d) 28,000 
d) $600 
16. Which of the following is an internal source of
1. There are two mutually exclusive projects that investment funding?
have different lives. Project A has a 4-year life and
Project B has a 5-year life. In replacement chain a) Issuing bonds 
analysis, the earliest common life will occur when b) Sale of stocks 
Project A is replicated times and Project B is c) Undistributed profits 
replicated times. d) All of the above are internal sources, 

a) 20; 20  17. The role of sunk cost in decision can be

b) 5:4 summed up in which of the following sayings?
c) 4;5 a) No pain, no gain 
d) It is not possible to determine the answers for b) A penny saved is a penny earned 
this problem.  c) The love of money is the root of all evil 
20. Maine Co. makes payments for purchases 30% d) Bygones are bygones 
during the month of purchase and the remainder 2. A project costing P 180,000 will produce the
the following month. April purchases are projected following annual cash benefits and salvage value:
to be P 80,000; May purchases will be P 120,000.
Cash payments on account for May will be End year Cash benefits Salvage value 
1 P 50,000 P70,000
a) P 54,000  2 P 50,000 P 60,000
b) P 84,000  3 P 50,000 P 50,000
c) P 36,000  What is the bailout payback?
d) P 92,000 
a) 3.0 
21. When budgets are used to evaluate b) 2.4 
performance and to set limits on spending, the c) 2.0 
process will often result in departments adding d) 2.6 
something 'extra' to ensure the budgets will be met.
This 'extra' is  3. A project whose acceptance precludes the
acceptance of one or more alternative projects is
a) Budgetary slack  referred to as
b) Management by objectives 
c) Budgetary kickback  a) a contingent project. 
d) Strategic planning b) an independent project.
c)
12. Question (-/1 Point)  d) a mutually exclusive project 
e) a dependent proiect.  Quiz #2. Capital Budgeting, CS and
9. A project costing P 28,715 will produce the WACC
following cash benefits after taxes: 1.Venom, Inc. acquired a turning machine that has
End of year After tax cash benefits  a useful life of 10 years with no salvage value. The
incremental annual net income before taxes is P 8,
1 P 11,000 500. Income taxes are 25% each year. The PV of
2 15,000  an annuity of P 1 for 10 years at 18% (the
3 18,000 company’s cost of capital) is 4.494. The annual
The company's cost of capital is 16%. The PV of P depreciation is P5,000. The NPV is positive P 1,
1 for one year at 16% is 0.862; for two years is 119.25. how much is the amount of investment?.
0.743; for three years is 0.641. What is the Correct answers: 50000
discounted (PV) payback period? 2.BlackWidow Company is not yet decided on its
hurdle rate to be used in the evaluation of capital
a) 2.3  budgeting projects. This lack of information will
b) 2.7  prohibit BlackWidow Company from calculating a
c) 1.7  project's? ARR, NPV, IRR respectively
d) 2.0 
No,No,No
18. Which of the following is included in a firm's
No,Yes,No
financial budget?
No,Yes,Yes
a) Cost of goods sold budget 
b) Production schedule  Yes,Yes,Yes
c) Capital budget  Correct answers: No,Yes,No
d) Budgeted income statement  3.When computing for the accounting rate of
return (ARR), which of the following is used?
19. Georgia Co. has projected sales to be P 60,000
in January, P 75,000 in February, and P 80,000 in Income after depreciation but before taxes
March. Georgia wants to have 25% of next month's Income before depreciation and taxes
sales needs on hand at the end of a month. If
Georgia has an average gross profit of 40%, what Income after depreciation and taxes
are the February purchases? Income before depreciation but after taxes
a) P 45,750  Your answer to question 3 is wrong. Correct
b) P 76,250  answers: Income after depreciation and taxes
c) P 46,250 4.Which one of these methods is project ranking
d) P 30,500  method rather than a project screening method?.
Internal rate of return
10. The NPV measures the change in shareholder
wealth that arises from undertaking a project. Net present value
a) consistent  Profitability index
b) peso  Simple rate of return
c) annual  Correct answers: Profitability index
d) static  5.A project costing P28, 000 will produce the
11. Which of the following is a difference between following cash benefits after taxes: Year 1:
a static budget and a flexible budget? P12,000; Year 2: P15,000; Year 3: P20,000 The
company’s cost of capital is 16%. The PV of P 1
a) A flexible budget gives allowances for for one year at 16% is 0.862; for two years is
different levels of activity while a static budget 0.743; for three years is 0.641. what is the
does not.  discounted (PV) payback period in years? Round
b) A flexible budget uses the average costs; a off answer to two decimal places
static budget used the fixed costs. 
c) A flexible budget includes all costs; a static
Correct answers: 2.51
budget includes only fixed costs. 
d) A flexible budget includes only 
6.Annual cash inflows from the capital projects are 11.Which if the following is not included in the
measured in terms of. term "capital" for WACC purposes.
Income after depreciation but before taxes Accruals and other current liabilities
Income after depreciation and taxes Retained Earnings
Income before depreciation but after taxes Long term liabilities
Income before depreciation and taxes Preferred shares
Your answer to question 6 is wrong. Correct Correct answers: Accruals and other current
answers: Income before depreciation but after liabilities
taxes 12.Which of the following is not a shortcoming of
7.One disadvantage of using the IRR is that it. payback period?.
may not be used when the cash flows varies it ignores the time value of money
from positive to negative in different years
it offers indication of project's liquidity
is difficult for managers to understand the
it offers no consideration of cash flows beyond
results of the calculations
the expiration of the payback period
provides a result that cannot be compared to
it encourages establishing a short payback
other projects
period
can only use limited number of years in Correct answers: it offers indication of project's
calculating the result liquidity
Correct answers: may not be used when the cash 13.A company has cost of debt of 6% and cost of
flows varies from positive to negative in different equity of 15%. In this country, the corporate
years income tax rate is 20%. If the company has target
8.The cost of retained earnings is equal to: debt to total capital ratio of 40%, its WACC is
closest to
the return on new common stock
9.6%
the return on existing common stock
8.88%
the return on preferred stock
10.9%
It does not have a cost.
Your answer to question 8 is wrong. Correct 11.4%
answers: the return on existing common stock Your answer to question 13 is wrong. Correct
9.The net present value (NPV) method of answers: 10.9%
investment project analysis assumes that the 14.In deciding whether to replace a machine,
project's cash flows are reinvested at?. which of the following is NOT a sunk cost
Risk free rate The book value of the existing machine
Firm's accounting rate of return The original cost of the existing machine
Computed Internal rate of return The expected resale price of the existing
machine
Discount rate used in NPV calculations
Correct answers: Discount rate used in NPV The depreciated cost of the existing machine
calculations Correct answers: The expected resale price of the
10.Which of the following methods for evaluating existing machine
capital projects is least useful from an investment 15.What is the overall (weighted average) cost of
decision point of view capital in the following situation? The firm has $10
million in long-term debt, $2 million in preferred
payback period
stock, and $8 million in common equity -- all at
internal rate of return market values. The before-tax cost for debt,
accounting rate of return preferred stock, and common equity forms of
capital are 8%, 9%, and 15%, respectively.
net present value Assume a 40% tax rate.
Correct answers: accounting rate of return
10.90%
6.40%
6.54%
9.30%
Correct answers: 9.30%
16.Carnage Company purchased a machine, which 21.If preferred stock is sold to the public at $78 per
will be depreciated on the straight-line basis over share with an issuance cost of $3 per share, what is
an estimated useful life of seven years and no the cost of the preferred stock if it pays an annual
salvage value. The machine is expected to generate dividends of $5.50?.
cash flows from operations, net of income taxes of
5.5%
P 80, 000 in each of the seven years. Labor’s
expected rate of return is 12%. Information on 7.3%
present value factors is as follows: Present value of 6.79%
P 1 at 12% for seven periods: 0.452 ; Present value
of an ordinary annuity of P 1 at 12% for 7 periods: 7.1%
4.564 Assuming a positive net present value of P Your answer to question 21 is wrong. Correct
42,500 what is the cost of the machine?. answers: 7.3%
322620 22.The term that refers to the cost incurred in the
17.Medusa Company is in a situation of having past that are not relevant on future decision is.
unlimited capital funds. The best decision rule, in unallocated indirect cost
an economic sense, for it to follow would be to
invest in all projects in which the. discretionary cost

Accounting rate of return is greater than the sunk cost

earnings as percentage of sales full absorption cost
IRR is greater than zero Correct answers: sunk cost
23.Regardless of the type of asset being acquired,
NPV is greater than zero the appropriate discount rate is
Payback reciprocal is greater than the IRR the weighted average cost of capital
Correct answers: NPV is greater than zero
18.If Maximus Company has computed the internal rate of return
profitability index of an investment project as 1.15, the after-tax cost of debt
then:.
the cost of equity capital
The project’s internal rate of return is less than Correct answers: the weighted average cost of
the discount rate. capital
The project’s internal rate of return is greater 24.Magik Company is considering the purchase of
than the discount rate. an investment that has a positive net present value
based on a discount rate of 12%. What is the
The relationship of the rate of return and the internal rate of return?
discount rate is not possible to determine from the
data given. Greater than 12%

The project’s internal rate of return is equal 12%

than the discount rate. Cannot be determined using the information
Correct answers: The project’s internal rate of
Less than 12%
return is greater than the discount rate.
Correct answers: Greater than 12%
19.Colossus Company is planning to buy an
25.Miles Inc. recently acquired a machine at a cost
equipment costing P 640, 000 that has an estimated
of P 64, 000. It will be depreciated on a straight-
life of 30 years and is expected to produce after-tax
line basis over 8 years, with no salvage value.
net cash inflows of P 128, 000 per year. Estimate
Albay expects that this machine will produce P18,
the IRR of the equipment without using present
000 annual net cash flow before income tax.
value factors. Answer should be in percentage..
Assuming an income tax rate of 50%, the
Correct answers: 20%, .20, 0.20, 0.2, 20
approximate payback period on this investment is
20.A project requires an investment of P 40, 000
(Hint: compute cash flow after tax first).
and has a net present value of P 10, 000. The
project’s profitability index (rounded to two 7.1 years
decimal places) would be
4.9 years
1.25
12.8 years
3.6 years
Your answer to question 25 is wrong. Correct
answers: 4.9 years
26.The accounting rate of return.
is not a straightforward decision criterion
is inconsistent with the divisional performance
does not consider the time value of money
measure know as return on investment
implicitly assume that the firm is able to
recognizes the time value of money
reinvest projected cash flows at the project's IRR
is synonymous with IRR
implicitly assume that the firm is able to invest
focuses on income as opposed to cash flows at the cost of capital
Correct answers: focuses on income as opposed to Your answer to question 32 is wrong. Correct
cash flows answers: implicitly assume that the firm is able to
27.WeaponHex Company is considering the sale of reinvest projected cash flows at the project's IRR
a machine with a book value of P 80, 000 and 3 33.The beta coefficient measures
years remaining in its useful life. Straight-line
the required return on a financial asset
depreciation of P 25, 000 annually is available.
The machine has a current market value of P 120, the return relative to the market return
000. What is the cash flow from selling the the return relative to the risk-free rate
machine if the tax rate is 40%?.
Correct answers: 10400 the historical volatility relative to the market's
28.The capital budgeting model that generally volatility
considered the best model for long-range decision Correct answers: the historical volatility relative to
making is the the market's volatilit
34.Gwenom Company is planning to purchase a
Bail-out model new machine. The payback period is estimated to
Discounted cash flow model be 5 years, the projects after tax cash flow is
estimated to be P 2, 000 yearly for the first three
Accounting rate of return
years and P3, 000 yearly for the next three years of
Payback model the payback period. Annual depreciation of P 1,
Correct answers: Discounted cash flow model 300 will be charged to income for each of the 6
29.Old equipment with a book value of P 15, 000 years of the payback period. The machine will
will be replaced by new equipment with a purchase cost:.
price of P 50,000, inclusive of freight charges of P 12000
2, 000. The market value of the old equipment is P 35.The NPV of a certain project is appropriately
12,000. Repair costs of P 2,000 can be avoided if computed. Which of the following will decrease
the new equipment is acquired. Assumed a tax rate the net present value (NPV) of that project?
of 35%. What is the initial (net) investment of the
increase the discount rate
project?.
Correct answers: 35650 decrease in the initial investment amount.
30.Depreciation is incorporated explicitly in the decrease the estimated effective income tax
discounted cash flow analysis of an investment rate
proposal because it.
extend the project life and associated cash
represents the initial cash outflow spread over flows
the life of the investment Correct answers: increase the discount rate
is a cost of operation that cannot be avoided 36.If the expected dividend is P1.05, the required
rate of return is 12%, and the growth rate is 8%,
reduces cash outlay for income taxes
what is the stock's current market price? Round off
is a cash inflow answers to two decimal places
Correct answers: reduces cash outlay for income Correct answers: 26.25
taxes
31.In equipment replacement decision, which one
of the following does not affect the decision
making process?.
original fair value of the old equipment
operating cost of the old equipment
current disposal price of old equipment
cost of the new equipment
Correct answers: original fair value of the old 37.Capital investment projects includes proposals
equipment for all of the following, except
32.A weakness of Internal rate of return approach
for determining acceptability of investments is that refinancing existing working capital
it. agreements
 hours. A ticket to the theater costs $30. What is the
the expansion of existing product offering
opportunity cost of going to the theater?.
acquisition of government mandated pollution
$47
control equipment
$90
additional research and development facilities
Correct answers: refinancing existing working $57
capital agreements
$27
38.For which of the following costs is it generally
Your answer to question 40 is wrong. Correct
necessary to apply a tax adjustment to a yield
answers: $27
measure?.
41.The bail-out payback method.
Cost of retained earnings.
measures the risk if the project is terminated
Cost of preferred stock.
equals the recovery period from normal
Cost of debt. operations
Cost of common equity. incorporates time value of money
Correct answers: Cost of debt
eliminates disposal value from the payback
calculations
39.The internal rate of return is the.
Correct answers: measures the risk if the project is
rate of interest rate in which NPV is equal to 0 terminated
42.RedHulk Company is considering a certain
rate of interest rate in which NPV is greater
project with the following projected cash income
than 1.0
after taxes for 4 years: Year 1, P 11, 000; Year 2, P
hurdle rate 10, 000; Year 3, P 8, 000; Year 4, P 7, 000. If the
rate of return generated from the operational projects requires an investment of P 25, 000 with a
cash flows salvage value of P 5, 000, what is the payback
Your answer to question 39 is wrong. Correct period in years? Round off your answer to two
answers: rate of interest rate in which NPV is equal decimal places..
to 0 Correct answers: 2.50, 2.5

40.Ronin has two options this weekend. He could

work at his job and earn $9/hour for three hours, or
he could go to a show at the theater for those three

CHAPTER 6: OPERATIONAL AND FINANCIAL BUDGETING

Multiple Choice

a 1. The starting point in preparing a comprehensive budget is

a. the sales forecast.
b. the cash budget.
c. the budgeted income statement.
d. the flexible expense budget.

d 2. Budgets are related to which of the following management functions?

a. Planning.
b. Control.
c. Performance evaluation.
d. All of the above.

d 3. Which of the following should be used to forecast sales?

a. Regression analysis.
b. The scatter diagram.
c. The judgment of the most experienced managers.
d. Whatever method produces the most accurate forecast.

a 4. A critical factor for using indicator methods to forecast sales is

a. the availability of a forecasted value for the indicator.
b. an upward trend in the value of the indicator.
c. governmental collection of data for computing and reporting the value of the indicator.
d. the availability of an indicator that covers the entire country.

d 5. Which of the following equations can be used to budget purchases? (BI = beginning inventory, EI = ending
inventory desired, CGS = budgeted cost of goods sold)
a. Budgeted purchases = CGS + BI - EI
b. Budgeted purchases = CGS + BI
c. Budgeted purchases = CGS + EI + BI
d. Budgeted purchases = CGS + EI - BI

b 6. A flexible budget is
a. one that can be changed whenever a manager so desires.
b. adjusted to reflect expected costs at the actual level of activity.
c. one that uses the formula total cost = cost per unit x units produced.
d. the same as a continuous budget.

b 7. The use of flexible (as opposed to static) budget allowances is LEAST important for which of the following?
a. Costs of the production department.
b. Costs of the general accounting department.
 c. Costs of the product shipping department.
d. Costs of the material receiving department.

d 8. Budgets set at very high levels of performance (i.e., very low costs)
a. assist in planning the operations of the company.
b. stimulate people to perform better than they ordinarily would.
c. are helpful in evaluating the performance of managers.
d. can lead to low levels of performance.

c 9. Inventory policy is most critical in the budgeting of

a. sales.
b. cost of goods sold.
c. purchases.
d. expenses.

a 10. Budgeting expenditures by purpose is called

a. program budgeting.
b. zero-based budgeting.
c. line budgeting.
d. flexible budgeting.

c 11. Which of the following is a difference between a static budget and a flexible budget?
a. A flexible budget includes only variable costs, a static budget includes only fixed costs.
b. A flexible budget includes all costs, a static budget includes only fixed costs.
c. A flexible budget gives different allowances for different levels of activity; a static budget does not.
d. None of the above.

a 12. A static budget is most appropriate for a department

a. with only fixed costs.
b. with only variable costs.
c. with mostly mixed costs.
d. with any of the above characteristics.

d 13. Which of the following is NOT an advantage of budgeting?

a. It requires managers to state their objectives.
b. It facilitates control by permitting comparisons of budgeted and actual results.
c. It facilitates performance evaluation by permitting comparisons of budgeted and actual results.
d. It provides a check-up device that allows managers to keep close tabs on their subordinates.
b 14. An imposed budget
a. is the same as a static budget.
b. can lead to poor performance.
c. is best for planning purposes.
d. eliminates the need for a sales forecast.

b 15. Prohibiting managers from overspending budget allowances

a. improves company performance.
b. can harm company performance.
c. eliminates the need for comparisons of budgeted and actual amounts.
d. usually reduces the need to prepare a cash budget.

b 16. Which of the following will occur if X Co.'s actual sales in May are lower than its budgeted sales for that month?
a. X won't have enough cash to cover bills requiring payment in May.
b. X's actual inventory at the end of May will be higher than budgeted.
c. X's actual purchases in June will be higher than budgeted.
d. All of the above.

c 17. JIT manufacturers are more likely than conventional manufacturers to

a. use static budget allowances for manufacturing costs.
b. prepare production budgets without a sales forecast.
c. budget unit production equal to budgeted unit sales.
d. experience budget variances.

a 18. If cash receipts from customers are greater than sales, which of the following is most likely to be true?
a. The balance of accounts receivable will decrease.
b. The company's outstanding debt will decrease.
c. The company's cash balance will increase.
d. The company will show a profit.

c 19. A cash budget is NOT prepared until a company has

a. obtained a commitment from its bank that cash will be available as needed.
b. prepared the pro forma balance sheet.
c. prepared its purchases budget.
d. determined that enough cash is available to meet dividend payments.

a 20. Which of the following is LEAST likely to be affected if unit sales for this month are lower than budgeted?
a. Production for this month.
b. Production for next month.
 c. Cash receipts for next month.
d. Inventory at the end of this month.

b 21. "Incremental budgeting" refers to

a. line-by-line approval of expenditures.
b. setting budget allowances based on prior year expenditures.
c. requiring top management approval of increases in budgets.
d. using incremental revenues and costs in budgeting.

b 22. The principal DISADVANTAGE of line budgeting is

a. it can only be used by not-for-profit entities.
b. it limits the flexibility of managers to accomplish the entity's objectives.
c. it works only in conjunction with zero-based budgeting.
d. none of the above.

a 23. The cash receipts budget

a. requires a sales forecast.
b. requires a purchases or production budget.
c. is prepared after the cash disbursements budget.
d. has none of the above characteristics.

c 24. The type of company most likely to run short of cash during the year is one with
a. little seasonality.
b. high contribution margin percentage.
c. high seasonality and rapid sales growth.
d. relatively low fixed costs.

d 25. If a company is earning a profit,

a. its cash balance is increasing.
b. its monthly cash disbursements will be stable.
c. its inventory is increasing.
d. it might have to borrow money.

a 26. One difference between budgeting in for-profit and not-for-profit entities is that not-for-profit entities usually
a. budget expenses before revenues.
b. don't need a cash budget.
c. are less likely to use incremental budgeting.
d. use computer software-packages to facilitate the budgeting process.

d 27. To prepare its cash disbursements budget, a company uses information from
a. its balance sheet at the end of the prior period.
b. its purchases budget.
c. its capital budget.
 d. all of the above sources.

b 28. Just-in-time manufacturers are more likely than conventional manufacturers to

a. prepare production budgets without a sales forecast.
b. budget materials purchases equal to the current month's needs for production.
c. budget unit production for the month at greater than budgeted unit sales for the month.
d. experience cash shortages.

c 29. Quorum Company desires an ending inventory of $120,000. It expects sales of $240,000 and has a beginning
inventory of $80,000. Cost of sales is 60% of sales. Budgeted purchases are
a. $120,000.
b. $144,000.
c. $184,000.
d. $264,000.

d 30. Garamond Company budgeted purchases of $200,000. Cost of sales was $240,000 and the desired ending
inventory was $84,000. The beginning inventory was
a. $40,000.
b. $64,000.
c. $84,000.
d. $124,000.

a 31. Wildwood Company budgeted purchases of 20,000 units. The budgeted beginning inventory was 4,800 units and
the budgeted ending inventory was 6,000 units. Budgeted sales were
a. 18,800 units.
b. 21,200 units.
c. 24,800 units.
d. 26,000 units.

c 32. Menomonie Company budgeted sales of 18,000 units. The budgeted beginning inventory was 3,000 units and the
budgeted ending inventory was 5,000 units. Budgeted production is
a. 23,000 units.
b. 21,000 units.
c. 20,000 units.
d. 16,000 units.

d 33. Baker Company budgets supplies as $20,000 + ($1.20 x direct labor hours). Baker has budgeted 18,000 direct
labor hours, $130,000 direct labor cost. The flexible budget allowance for supplies is
a. $18,000.
b. $20,000.
c. $150,000.
d. some other number.

b 34. Equinox Company budgeted sales of 44,000 units for January, 60,000 for February. The budgeted beginning
inventory for January 1 was 14,000 units. Equinox desires an ending inventory equal to one-half of the
 following month's sales needs. Budgeted production for January is
a. 74,000 units.
b. 60,000 units.
c. 52,000 units.
d. 28,000 units.

c 35. Sams Company manufactures a single product. It keeps its inventory of finished goods at 75% the coming
month's budgeted sales, inventory of raw materials at 50% of the coming month's budgeted production needs.
Each unit of product requires two pounds of materials. The production budget is, in units: May, 1,000; June,
1,200; July, 1,300; August, 1,600. Raw material purchases in June would be
a. 1,525 pounds.
b. 2,550 pounds.
c. 2,800 pounds.
d. 3,050 pounds.

a 36. Hayward Company desires an ending inventory of $70,000. It expects sales of $400,000 and has a beginning
inventory of $65,000. Cost of sales is 65% of sales. Budgeted purchases are
a. $265,000.
b. $395,000.
c. $405,000.
d. $535,000.

c 37. Bryce Company budgeted sales of 50,000 units for January, 60,000 for February. Bryce Company desires an
ending inventory equal to one-half of the following month's sales needs. Inventory on January 1 was as desired.
Budgeted production for January is
a. 22,000 units.
b. 52,000 units.
c. 55,000 units.
d. 74,000 units.

c 38. Chetek Company budgeted purchases of 19,000 units. The budgeted beginning inventory was 12,400 units and the
budgeted ending inventory was 13,000 units. Budgeted sales were
a. 32,000 units.
b. 31,400 units.
c. 18,400 units.
d. 19,600 units.

d 39. Barron Company manufactures a single product. Barron keeps inventory of raw materials at 50% of the coming
month's budgeted production needs. Each unit of product requires three pounds of materials. The production
budget is, in units: May, 1,000; June, 1,200; July, 1,300; August, 1,600. Raw material purchases in July would
be
a. 1,450 pounds.
 b. 2,400 pounds.
c. 3,900 pounds.
d. some other number.

c 40. Acker Company has prepared the following flexible budget for production costs: total production costs =
$260,000 + $5X, where X is the number of machine hours. Acker produced 20,000 units, using 34,000
machine hours at a total cost of $425,000. The flexible budget allowance for production costs is
a. $260,000.
b. $425,000.
c. $430,000.
d. $525,000.

c 41. Scooter Inc. has projected sales to be $130,000 in June, $135,000 in July and $150,000 in August. Scooter collects
30% of a month's sales in the month of sale, 50% in the month following the sale, and 16% in the second month
following the sale. Cash collections in August would be
a. $ 45,000.
b. $127,300.
c. $133,300.
d. $138,500.

d 42. Rundall Co. makes payments for purchases 30% during the month of purchase and the remainder the following
month. April purchases are projected to be $160,000; May purchases will be $240,000. Cash payments in May
will be
a. $ 72,000.
b. $108,000.
c. $168,000.
d. $184,000.

c 43. Randall Co. makes payments for purchases 30% during the month of purchase and the remainder the following
month. April purchases are projected to be $80,000; May purchases will be $120,000. The accounts payable
balance on May 31 will be
a. $36,000.
b. $54,000.
c. $84,000.
d. $92,000.

c 44. Alfuth Co. makes payments for purchases 10% during the month of purchase, 60% in the following month, and
the remainder in the second month following the purchase. Purchases are projected to be $260,000 in January,
$280,000 in February, and $320,000 in March. March payments will be
a. $ 32,000.
b. $168,000.
c. $278,000.
d. some other number.
d 45. Reid Co. makes payments for purchases 10% during the month of purchase, 60% in the following month, and the
remainder in the second month following the purchase. Purchases are projected to be $130,000 in January,
$140,000 in February, and $160,000 in March. The March 31 accounts payable balance will be
a. $48,000.
b. $96,000.
c. $144,000.
d. $186,000.

c 46. Andover Inc. has projected sales to be: February, $10,000; March, $9,000; April, $8,000; May, $10,000; and June,
$11,000. Andover has 30% cash sales and 70% sales on account. Accounts are collected 40% in the month
following the sale and 55% collected the second month. Total cash receipts in May would be
a. $3,000.
b. $8,150.
c. $8,705.
d. some other number.

d 47. Conde Inc. has projected sales to be: February, $20,000; March, $18,000; April, $16,000; May, $20,000; and
June, $22,000. Conde has 30% cash sales and 70% sales on account. Accounts are collected 40% in the month
following the sale and 60% collected the second month. Accounts receivable for May 31 would be
a. $ 6,160.
b. $13,300.
c. $14,000.
d. $20,720.

d 48. Holmgren estimates its supplies purchases to be $21,000 in August and $28,000 in September. Holmgren pays
70% of its accounts in the month of purchase with the remainder paid the following month. September
payments would be
a. $14,700.
b. $19,600.
c. $23,100.
d. $55,900.

c 49. Danner Inc. has projected sales to be $100,000 in June, $90,000 in July, and $70,000 in August. Danner collects
50% of a month's sales in the month of sale, 30% in the month following the sale, and 16% in the second month
following the sale. Cash collections in August would be
a. $35,000.
b. $62,000.
c. $78,000.
d. $86,000.

a 50. Clearwater Inc. has projected sales to be $160,000 in April, $200,000 in May, and $240,000 in June. Clearwater
collects 40% of a month's sales in the month of sale, 40% in the month following the sale, and 20% in the
second month following the sale. The accounts receivable balance on June 30 would be
a. $184,000.
b. $144,000.
c. $ 40,000.
 d. some other number.

True-False

F 1. A just-in-time manufacturer does NOT need a sales budget.

T 2. A flexible budget allowance is NOT especially useful for budgeting discretionary costs.

F 3. The purchases budget is prepared before the sales budget because the company cannot estimate what it will sell
until it has some idea of what will be on hand.

F 4. The longer the time period covered by a budget, the more useful the budget will be for controlling operations.

F 5. A purchases budget is normally prepared after the company has forecast how much cash it will have available to
pay for purchases.

F 6. Imposed budgets are exceptionally ambitious goals not likely to be achieved without making fundamental changes
in the way a job is done.

F 7. A JIT manufacturer that maintains no inventory doesn't need a cash disbursements budget.

F 8. The budget for a retailer is likely to be more complex than that for a manufacturer because a retailer has a wider
variety of customers.

F 9. The increasing public demand for accountability from governmental and other not-for-profit organizations has
resulted in an increased use of incremental budgeting.

T 10. Line-by-line budget authorization is common in governmental units.

Problems

1. Ballan Inc. estimates its units sales for the coming months to be as follows:

March 280,000
April 260,000
May 250,000
June 230,000
July 240,000
August 225,000

Ballan maintains inventory at budgeted sales needs for the next month. March 1 inventory will be 248,000 units.

a. Prepare a monthly purchasing schedule for March through July.

SOLUTION:

a. March purchases: 292,000 units [280,000 + 260,000 – 248,000]

April purchases: 250,000 units [260,000 + 250,000 – 260,000]

May purchases: 230,000 units [250,000 + 230,000 – 250,000]

June purchases: 240,000 units [230,000 + 240,000 – 230,000]

July purchases: 225,000 units [240,000 + 225,000 – 240,000]

2. Superior Company manufactures a single product. It keeps its inventory of finished goods at twice the coming
month's budgeted sales and inventory of raw materials at 150% of the coming month's budgeted production. Each
unit of product requires five pounds of materials, which cost $3 per pound. The sales budget is, in units: May,
10,000; June, 12,400; July, 12,600; August, 13,200.

a. Compute budgeted production for June.

b. Compute budgeted production for July.

c. Compute budgeted material purchases for June in pounds and dollars.

SOLUTION:

a. June production: 12,800 units [12,400 + (2 x 12,600) - (2 x 12,400)]

b. July production: 13,800 units [12,600 + (2 x 13,200) - (2 x 12,600)]

c. June materials purchases: 71,500 pounds; $214,500

Used in production (5 lbs. x 12,800) 64,000 lbs.

Ending inventory (5 lbs. x 13,800 x 150%) 103,500
-------
Total 167,500
Less beginning inventory (5 lbs. x 12,800 x 150%) 96,000
-------
Purchases 71,500
Times cost per pound $3
-------
Equals dollar purchases $214,500
========
3. Ironwood sells a single product for $10. The purchase cost is $4 per unit and Ironwood pays a 20% sales
commission. Fixed costs are $45,000 per month including $12,000 depreciation, and the company maintains
inventory equal to budgeted sales needs for the following month. The following budgeted data are available.

Inventory on hand, February 1 28,000 units

Budgeted sales - February 24,000 units
- March 26,000 units
- April 25,000 units

a. Compute total budgeted income for February and March.

b. Find budgeted inventory at March 31 in units and dollars.

c. Find budgeted purchases for March in units and dollars.

SOLUTION:

a. Budgeted income: $110,000

Sales [(24,000 + 26,000) x $10] $500,000

Cost of sales (50,000 x $4) 200,000
-------
Gross profit $300,000
Commissions at 20% 100,000
-------
Contribution margin $200,000
Fixed costs (2 x 45,000) 90,000
-------
Income $110,000
========
b. Budgeted inventory: 25,000 units; $100,000 ($4 x 25,000)
c. Budgeted purchases: 25,000 units; $100,000

Cost of sales 26,000 units $104,000

Ending inventory 25,000 100,000
------ --------
Total required 51,000 $204,000
Less beginning inventory 26,000 104,000
------ --------
Purchases 25,000 units x $4 $100,000
====== ========

4. Westrum estimates production overhead costs equal to $300,000 + $2X, where X is the number of machine hours
used. Westrum budgeted 40,000 machine hours for 20X4. Westrum produced 23,000 units in 20X4, each requiring
3 machine hours. Actual production costs were $420,000.

a. Calculate the flexible budget allowance for production overhead costs for 20X4.

b. Find the amount and direction of the budget variance for 20X4 for production overhead. (favorable unfavorable)
Circle one answer.
SOLUTION:

a. Flexible budget allowance, $438,000 [$300,000 + (23,000 x 3 x $2)]

b. Budget variance: $18,000 favorable ($438,000 - $420,000)

5. Acme Inc. estimates its dollar sales for the coming months to be as follows.

June $340,000
July 360,000
August 300,000
September 260,000
October 240,000
November 200,000

Acme has an average gross margin of 40% of sales and maintains inventory at 75% of budgeted sales needs for the
next month. Acme began June with $150,000 in inventory.

a. Prepare a monthly purchasing schedule (in $) for as many months as is possible.

SOLUTION:

a. June July August September October

 Sales $340,000 $360,000 $300,000 $260,000 $240,000
x 40% x .40 x .40 x .40 x .40 x .40
-------- -------- -------- -------- --------
Cost of Sales $136,000 $144,000 $120,000 $104,000 $ 96,000
+ Ending Inv 108,000 90,000 78,000 72,000 60,000
- Beg Inv (150,000) (108,000) (90,000) (78,000) (72,000)
-------- -------- -------- -------- --------
Purchases $ 94,000 $126,000 $108,000 $ 98,000 $ 84,000
======== ======== ======== ======== ========

6. Bay City estimates production overhead costs equal to $200,000 + $4X + $7Y, where X is the number of direct labor
hours used and Y is the number of machine hours used. Bay City budgeted 20,000 direct labor hours and 50,000
machine hours for 20X2. Bay City produced 30,000 units in 20X2, each requiring 1 direct labor hour and 2.5
machine hours. Actual production costs were $890,000.

a. Calculate the flexible budget allowance for production overhead costs for 20X2.

b. Find the amount and direction of the budget variance for 20X2 for production overhead. (favorable unfavorable)
Circle one answer.
SOLUTION:

a. Flexible budget allowance, $845,000 [$200,000 + (30,000 x 1 x $4) + (30,000 x 2.5 x 7)]

b. Budget variance: $45,000 unfavorable ($845,000 - $890,000)

7. Webster Company has the following sales budget.

January $200,000
February $240,000
March $300,000
April $360,000

Cost of sales is 70% of sales. Sales are collected 40% in the month of sale and 60% in the following month.
Webster keeps inventory equal to double the coming month's budgeted sales requirements. It pays for purchases
80% in the month of purchase and 20% in the month after purchase. Inventory at the beginning of January is
$190,000. Webster has monthly fixed costs of $30,000 including $6,000 depreciation. Fixed costs requiring cash
are paid as incurred.

a. Compute budgeted cash receipts in March.

b. Compute budgeted accounts receivable at the end of March.

c. Compute budgeted inventory at the end of February.

d. Compute budgeted purchases in February.

 e. March purchases are $290,000. Compute budgeted cash payments in March to suppliers of goods.

f. Compute budgeted accounts payable for goods at the end of February.

g. Cash at the end of February is $45,000. Cash disbursements are not required for anything other than payments to
suppliers and fixed costs. Compute the budgeted cash balance at the end of March.

SOLUTION:

a. March receipts: $264,000 [($240,000 x 60%) + ($300,000 x 40%)]

b. Receivables at end of March: $180,000 [$300,000 x (100% - 40%)]

c. Inventory at end of February: $420,000 ($300,000 x 70% x 2)

d. February purchases: $252,000 [($240,000 x 70%) + ($300,000 x 2 x 70%) - ($240,000 x 2 x 70%)]

e. March payments: $282,400 [(252,000 x 20%) + ($290,000 x 80%)]

f. AP at end of February: $50,400 ($252,000 x 20%)

g. Cash at end of March: $2,600 ($25,000 + $264,000 - $282,400 - $24,000)

8. Weasel Company has the following sales projections for 20X3:

January $200,000
February 210,000
March 225,000
April 230,000
May 245,000
June 240,000

Weasel collects 40% of its sales in the month of sale, 45% in the month following the sale and 13% in the second
month following the sale. Records show that sales were $225,000 in November and $208,000 in December 20X2.
a. Prepare a schedule of cash receipts for the first three months of 20X3.

b. What would be the accounts receivable (net of bad debts) balance on March 31, 20X3?
SOLUTION:

a. January collections: (13% x 225,000) = $29,250

(45% x 208,000) = 93,600
 (40% x 200,000) = 80,000
-------
$202,850
========

February collections: (13% x 208,000) = $27,040

(45% x 200,000) = 90,000
(40% x 210,000) = 84,000
-------
$201,040
========

March collections: (13% x 200,000) = $26,000

(45% x 210,000) = 94,500
(40% x 225,000) = 90,000
-------
$210,500
========

b. $157,800 $ 27,300 = February sales 210,000 x 13%

$130,500 = March sales 225,000 x (45% + 13%)
--------
$157,800
========
9. Bismarck has the following sales budget:
March $300,000
April $312,000
May $320,000
June $348,000

Cost of sales is 55% of sales. Bismarck keeps an inventory equal to one-fourth the coming month's budgeted sales
requirements. It pays for purchases 40% in the month of purchase and 60% in the month after purchase. Accounts
Payable is $94,800 on March 1.
a. Prepare a monthly purchasing schedule for March through May.
b. Prepare a monthly cash payment schedule for March through May.
c. Compute the accounts payable balance as of May 31.
SOLUTION:
a. March April May
Sales $300,000 $312,000 $320,000
x 55% x .55 x .55 x .55
-------- -------- --------
Cost of Sales $165,000 $171,600 $176,000
+ Ending Inv 42,900 44,000 51,975
 - Beg Inv (41,250) (42,900) (44,000)
-------- -------- --------
Purchases $166,650 $172,700 $183,975
======== ======== ========

b. March payments: (40% x 166,650) = $ 66,660

Mar 1 Acct Pay = 94,800
-------
$161,460
========

April payments: (40% x 172,700) = $ 69,080

(60% x 166,650) = 99,990
-------
$169,070
========

May payments: (40% x 183,975) = $ 73,590

(60% x 172,700) = 103,620
-------
$177,210
========

c. Accounts Payable, May 31: $110,385 [60% x $183,975]

10. Hicks Company has the following sales projections for 20X4:
January $160,000 March 175,000 May 195,000
February 168,000 April 180,000 June 190,000

Hicks collects 30% of its sales in the month of sale, 45% in the month following the sale, and 24% in the second
month following the sale. Records show that sales were $160,000 in November and $168,000 in December 20X3.
a. Prepare a schedule of cash receipts for the first three months of 20X4.
b. What would be the accounts receivable balance (net of bad debts) on March 31, 20X4?
SOLUTION:
a. January collections: (24% x 160,000) = $38,400
(45% x 168,000) = 75,600
(30% x 160,000) = 48,000
-------
$162,000
========
February collections: (24% x 168,000) = $40,320
(45% x 160,000) = 72,000
(30% x 168,000) = 50,400
 -------
$162,720
========

March collections: (24% x 160,000) = $38,400

(45% x 168,000) = 75,600
(30% x 175,000) = 52,500
-------
$166,500
========
b. $161,070 $40,320 = February sales (168,000 x 24%)
120,750 = March sales [175,000 x (45% + 24%)]
-------
$161,070
========