Question

9. Capital budgeting and the post-audit process Cramer Designs produces a wide range of women's apparel. Three years ago, the company spent $1.2 million to launch its line of designer handbags. Brittany Cramer, the company's CEO and founder, is conducting a post-audit on the handbag line to determine how the division's performance compared to the company's expectations. She has found that the revenue from the handbag division was much lower than expected; however, the company was able to produce the handbags for a much lower cost per unit than expected. Which of the following should be considered the main purpose(s) of the post-audit? Check all that apply It helps project the firm's tax liability. It helps improve operations It encourages managers to generate reasonable forecasts. When a firm a exhausts its retained earnings and must raise capital from external sources, its weighted average cost of capital (WACC) will

Answer 1

a)

It helps improve operations

It encourages managers to generate reasonable forecasts

b)

Increase