 Explain the reasoning behind the separation of the investing and financing aspects of making

long-term decisions
 Explain the role of capital expenditure decisions in the strategic planning process
 Describe the steps in the net present value method for making long-term decisions using discounted cash
flows, and explain the effect of income taxes on cash flows
 Describe the internal rate of return method of assessing investment alternatives
 Explain why analysts will need more than just cash flow analysis to justify or reject an investment
 Explain why the capital investment process requires audits
 Identify the behavioral issues involved in capital budgeting

8 Self-Study Problems 8.1 and 8.2, All even-numbered exercises

9 Exercises 18 and 20

10 Self-Study Problem 10.3, Exercises 26, 28, 32

11 Exercises 26 and 32

12 No computations

13 Self-Study Problem 13.1, Exercise 18

1. Explain the use of a budget as a tool for planning and performance

evaluation.
2. Explain how a budget can affect employee motivation.
3. Compare the four types of responsibility centers.
4. Describe the master budget.
5. Explain the difference between a flexible budget and a master budget.
6. Describe ethical dilemmas in budgeting.
7. Explain the reasons for conducting variance analyses.
8. Describe how to use the budget for performance evaluation.
9. Identify the different types of variances between actual results and the
flexible budget.
10. Describe the role of variance analysis in service organizations.
11. Assign responsibility for variances.
12. Explain the difference between price and efficiency variances.