11.

While drafting the operating budgets in a manufacturing company…1

 The budgeted EBIT using the Profit and Loss Account (P&LA) by destination (by

function) will be more than the budgeted EBIT using the P&LA by nature;

 The budgeted EBIT using the (P&LA) by destination (by function) will be less than the

budgeted EBIT using the P&LA by nature;

 The budgeted EBIT using the P&LA by destination (by function) will be more than the

budgeting EBIT using the P&LA by nature only when the Gross Margin will be equal to

EBITDA;

 None of the previous answers.

15. Operating budgets are developed:

 Before Cash Budgets and Capital Expenditure Budgets;

 Co-temporally with Cash Budgets and Capital Expenditure Budgets;

 Co-temporally with Cash Budgets and before Capital Expenditure Budgets;

 None of the previous answers.2

3. Which one of the following sentences about “Complete Allocation” of Corporate Costs is

TRUE?3

 Complete Allocation is based on a proportional division: therefore, it grants to respect the

specific responsibility principle;

 Complete allocation is usually cheaper and easier to be performed than Partial or No

allocation;

 It can make explicit that corporate resources impact on Business Units performances;

 None of the above.

1
AFC_Budgeting_solutions.pdf
2
Same
3
AFC_Cost Allocation_solutions.pdf
4. The issue of Corporate Cost Allocation:4

 Arises when there are resources used at Corporate Level, but managed by Business Units;

 Arises when there are resources used by Business Units, but managed at Corporate Level;

 Is not related to Business Unit performances;

 Can be faced by understanding prices of intra-company exchanges.

5. For allocating actual costs proportionally to an allocation basis, you should know:5

 Just the overall usage of the resource and the overall cost;

 Just the overall capacity of the resource and the overall cost;

 Just the usage of the resource by each unit and the overall cost of the resource;

 Just the overall usage and the estimated cost for each resource.

11. If resources shared among different Business Units are not much used (low saturation
and high availability)6

 It is better not to perform cost allocation;

 Allocating proportionally to a driver risks discouraging their usage;

 Allocating proportionally to the fee risks discouraging their usage;

 None of the above.

12. To determine the hourly fee to allocate corporate costs, one should know:7

 Just the overall usage of the resource and the overall cost;

 Just the overall capacity of the resource and the overall cost;

 Just the usage of the resource by each unit and the overall cost of the resource;

 Just the overall usage and the estimated cost for each resource.

Šta je Beta levered, a šta Beta unlevered? (Asset/Equity)

TV when FCFF is constant?

4
Same.
5
Same.
6
Same.
7
Same.
TV when FCFF grows at a constant rate (starting from the next year)?

TV when the FCFF will remain constant for next 10 years. After this period, the FCFF will
be null?

TV when the FCFF will grow at a rate of 2% for each one of next 10 years. After this
period, the FCFF will be null.

The FCFE will remain constant over years and equal to the one of 2014.

The FCFE will grow at a rate of 3% for each year, starting from 2015.

The FCFE will remain constant for next 7 years. After this period, the FCFE will be null.

The FCFE will grow at a rate of 3% for each one of next 7 years. After this period, the
FCFE will be null.

Discuss the differences between Beta Levered and Beta Unlevered from a theoretical point
of view.

Please give an explanation from a theoretical point of view of the differences between the
decision to ask a new mortgage or a line of credit.

1. In which of the following cases, the transfer price based on the market is difficult to
apply:8

 When internal negotiation costs are likely to be high

 When the selling units have a shortage in production capacity

 When the products/services involved in the transactions are characterized by a market

with unstable prices

 When the transfer price has fiscal implications

2. How does the Dual Transfer Price scheme work?

 By setting a unique reference price at which the product/service can be exchanged in

internal transactions based on the external market

8
AFC_Transfer Pricing_solutions.pdf
 By correcting the market price, taking into account lower transaction and administrative

costs for internal transactions

 By averaging the price of the market, when there is price-market variability

 By defining different selling and purchasing prices for the internal transactions,

managing the difference as a corporate account.

3. What of the following is a disadvantage of a Negotiated Transfer Price?

 The integration among business units decreases

 Negotiated transfer prices cannot be used in turbulent contexts

 These systems should be used coupled with market-based Transfer prices

 Negotiated Transfer Prices usually might lead to a suboptimal saturation of the

production capacity of the selling units

4. What of the following information is not relevant for selecting the most appropriate
Transfer Price System?

 The fact that Business Units are in different countries, having to deal with different fiscal

policies

 The turbulence of the external context of the companies

 The desired level of autonomy of the different Business Units

 The minimum set of resources required for running each organizational unit