Corporate Finance and Accounting
Chapter
Exam Questions
Course Introduction
Corporate Finance and Accounting provides a comprehensive exploration of the fundamental principles and practices underlying financial management and accounting in modern corporations. Covering topics such as financial statement analysis, capital budgeting, risk-return trade-offs, capital structure decisions, working capital management, and valuation techniques, this course equips students with the analytical tools needed to make informed financial decisions. It emphasizes the integration of accounting data in financial decision-making and the ethical considerations inherent in the corporate environment, preparing students to understand the impact of financial strategies on organizational performance and stakeholder value.
Recommended Textbook Managerial Accounting 9th Edition by
Ronald W. Hilton
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Page 2
Chapter 1: The Changing Role of Managerial Accounting in a Dynamic Business Environment
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Q1) Given the following information,what is the cost of unused capacity? Cost of material supplied is $8,600;Cost of material used is $8,000;Cost of material used per shelf is $8;Cost of material supplied per shelf is $8.60.
A)$600.
B)$6,000.
C)$0.60.
D)$1,000.
E)There is no unused capacity.
Answer: A
Q2) Which of the following is not an element of competency?
A)To develop appropriate knowledge about a particular subject.
B)To perform duties in accordance with relevant laws.
C)To perform duties in accordance with relevant technical standards.
D)To refrain from engaging in an activity that would discredit the accounting profession.
E)To prepare clear reports after an analysis of relevant and reliable information.
Answer: D
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Chapter 2: Basic Cost Management Concepts and Accounting for Mass Customization Operations
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Q1) Which of the following would not be characterized as a cost object?
A)An automobile manufactured by General Motors.
B)The New York Fire Department.
C)A Burger King restaurant located in Cleveland,Ohio.
D)A Delta Airlines flight from Atlanta to Miami.
E)All of these are examples of cost objects.
Answer: E
Q2) Finished goods inventory is ordinarily held for sale by a manufacturing company.
A)True
B)False
Answer: True
Q3) Which of the following is a product cost?
A)Glass in an automobile.
B)Advertising.
C)The salary of the vice president-finance.
D)Rent on a factory.
E)Both "A" and "D."
Answer: E
Page 4
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Chapter 3: Product Costing and Cost Accumulation in a Batch Production Environment
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Q1) Which of the following statements about material requisitions is false?
A)Material requisitions are often computerized.
B)Material requisitions are a common example of source documents.
C)Material requisitions contain information that is useful to the cost accounting department.
D)Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse.
E)Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.
Answer: D
Q2) The term "normal costing" refers to the use of job-costing systems.
A)True
B)False
Answer: False
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Chapter 4: Process Costing and Hybrid Product-Costing Systems
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Q1) The cost of the ending work in process is:
A)$54,000.
B)$78,000.
C)$114,000.
D)$195,000.
E)some other amount.
Q2) Which of the following statements is false?
A)In job-order costing,costs are accumulated by job order.
B)In process costing,costs are accumulated by department.
C)In process costing,the cost per unit in a department is found by spreading the period's manufacturing costs over the production activity.
D)In process costing,the total cost of each unit is found by dividing the total factory costs by the number of units completeD.
E)In job-order costing,the unit cost is found by dividing the job's total cost by the job's total units.
Q3) Operation costing tends to parallel job-order costing with respect to the treatment of conversion cost.
A)True
B)False
Page 6
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Chapter 5: Activity-Based Costing and Management
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Q1) What is HiTech's pool rate for the material-handling activity?
A)$1.00 per part.
B)$2.25 per part.
C)$6.62 per labor hour.
D)$13.23 per part.
E)A rate other than those listed abovE.
Q2) Which of the following statements regarding quality is (are)true for a company that has implemented a JIT system?
I.JIT requires quality production facilities,methods,and employees.
II.JIT requires the acquisition of quality raw materials.
III.JIT requires that long-term contracts be negotiated with quality suppliers.
A)II only.
B)I and II.
C)I and III.
D)II and III.
E)I,II,and III.
Q3) An example of a customer-value-added activity is final painting and polishing of the product.
A)True
B)False
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Chapter 6: Activity Analysis,cost Behavior,and Cost
Estimation
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Q1) Which of the following costs changes in direct proportion to a change in the activity level?
A)Variable cost.
B)Fixed cost.
C)Semivariable cost.
D)Step-variable cost.
E)Step-fixed cost.
Q2) A mixed cost is often known as a:
A)semivariable cost.
B)step-fixed cost.
C)variable cost.
D)curvilinear cost.
E)discretionary cost.
Q3) Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?
A)Semivariable cost.
B)Curvilinear cost.
C)Step-fixed cost.
D)Step-variable cost.
E)Fixed cost.
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Q1) To achieve the objectives of sections 302 and 404 of the Sarbanes-Oxley Act,management and independent auditors should:
A)Disclose the minutia of the internal control structure.
B)Conduct a cost-benefit analysis prior to deciding whether or not to adopt these sections.
C)Emphasize those areas where the greatest risk of fraud or material misstatement is likely to occur.
D)Analyze all financial transactions that are included in the reported financial statements.
E)Work together to design the most effective internal control system.
Q2) The provisions of sections 302 and 404 of the Sarbanes-Oxley Act (as originally enacted)have proved especially troublesome for:
A)Small businesses.
B)Private universities.
C)Cities and municipalities.
D)Healthcare providers.
E)Individual taxpayers.
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Chapter 7: Cost-Volume-Profit Analysis
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Q1) Hatchcox Company is studying the impact of the following:
1.An increase in sales price.
2.An increase in the variable cost per unit.
3.An increase in the number of units sold (note: each unit produces a $6 contribution margin).
4.A decrease in fixed costs.
5.A proposed change in the method of compensation for salespeople,away from commissions based on gross sales dollars and toward higher monthly salaries.
Required:
Determine the impact of each of these operating changes on Hatchcox's per-unit contribution margin and break-even point by completing the chart that follows.Your responses should be Increase (INC),Decrease (DEC),No Effect (NE),or Insufficient Information to Judge (II).
Q2) The extent to which an organization uses fixed costs in its cost structure is measured by financial leverage.
A)True
B)False
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Chapter 8: Absorption and Variable Costing
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Q1) Which of the following situations would cause variable-costing income to be higher than absorption-costing income?
A)Units sold equaled 39,000 and units produced equaled 42,000.
B)Units sold and units produced were both 42,000.
C)Units sold equaled 55,000 and units produced equaled 49,000.
D)Sales prices decreased by $7 per unit during the accounting perioD.
E)Selling expenses increased by 10% during the accounting period.
Q2) Which of the following conditions would cause absorption-costing income to be higher than variable-costing income?
A)Units sold exceeded units produced.
B)Units sold equaled units produced.
C)Units sold were less than units produced.
D)Sales prices decreaseD.
E)Selling expenses increased.
Q3) Indiana's per-unit inventoriable cost under absorption costing is:
A)$9.50.
B)$25.00.
C)$28.00.
D)$33.00.
E)$40.50.
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Chapter 9: Profit Planning and Activity-Based Budgeting
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Q1) Coleman,Inc.anticipates sales of 50,000 units,48,000 units,and 51,000 units in July,August,and September,respectively.Company policy is to maintain an ending finished-goods inventory equal to 40% of the following month's sales.On the basis of this information,how many units would the company plan to produce in July?
A)46,800.
B)49,200.
C)49,800.
D)52,200.
E)Some other amount.
Q2) Which of the following organizations is not likely to use budgets?
A)Manufacturing firms.
B)Merchandising firms.
C)Firms in service industries.
D)Nonprofit organizations.
E)None of these,because all are likely to use budgets.
Q3) Discuss the importance of budgeting and identify five purposes of budgeting systems.
Q4) List several factors that an organization might consider when developing a sales forecast.
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Chapter 10: Standard Costing,Operational Performance
Measures,and the Balanced Scorecard
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Q1) Soloman Corporation recently purchased 25,000 gallons of direct material at $5.60 per gallon.Usage by the end of the period amounted to 23,000 gallons.If the standard cost is $6.00 per gallon and the company believes in computing variances at the earliest point possible,the direct-material price variance would be calculated as:
A)$800F.
B)$9,200F.
C)$9,200U.
D)$10,000F.
E)$10,000U.
Q2) A direct-labor efficiency variance cannot be caused by:
A)inexperienced employees.
B)poor quality raw materials.
C)employee inefficiency.
D)an out-of-date labor time standarD.
E)producing fewer finished units than originally planned.
Q3) The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.
A)True
B)False
Page 13
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Chapter 11: Flexible Budgeting and the Management of
Overhead and Support Activity Costs
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Q1) Atlanta Enterprises incurred $828,000 of fixed overhead during the period.During that same period,the company applied $845,000 of fixed overhead to production and reported an unfavorable budget variance of $41,000.How much was Atlanta's budgeted fixed overhead?
A)$787,000.
B)$804,000.
C)$869,000.
D)$886,000.
E)Not enough information to judgE.
Q2) Benson's fixed-overhead volume variance is:
A)$10,000 favorable.
B)$15,000 favorable.
C)$15,000 unfavorable.
D)$20,000 favorable.
E)$20,000 unfavorablE.
Q3) Briefly explain the nature of the fixed-overhead volume variance.Be sure to address the issue of capacity utilization in your response.
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Chapter 12: Responsibility Accounting, Quality Control, and Environmental Cost Management
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Q1) Bluegrass,Inc. ,which is headquartered in Atlanta,operates a chain of 225 clothing stores throughout the United States.Consider the costs that appear in the following table,many of which pertain to the company's sole operation in Jacksonville,Florida:
Q2) Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centers?
A)Number of employees in the responsibility centers.
B)Budgeted sales dollars of the responsibility centers.
C)Square feet occupied by the responsibility centers.
D)Budgeted net income of the responsibility centers.
E)Total budgeted direct operating costs of the responsibility centers.
Q3) Which of the following fail to be captured and reported by a company's accounting system as an environmental cost?
A)Monitoring costs.
B)Abatement costs.
C)Hidden costs.
D)On-site remediation costs.
E)Off-site remediation costs.
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Chapter 13: Investment Centers and Transfer Pricing
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Q1) Economic value added:
A)is a dollar amount rather than a percentage.
B)uses a firm's weighted-average cost of capital.
C)uses total assets in its computation and ignores current liabilities.
D)cannot be negative.
E)possesses characteristics "A" and "B" abovE.
Q2) A company's sales margin:
A)must,by definition,be greater than the firm's net sales.
B)has basically the same meaning as the term "contribution margin."
C)is computed by dividing sales revenue by income.
D)is computed by dividing income by sales revenue.
E)shows the sales dollars generated from each dollar of incomE.
Q3) Imputed interest can best be described as:
A)the company's weighted average cost of capital.
B)the prime interest rate on the date of the transaction.
C)the interest rate charged for the company's bonds.
D)the minimum required rate of return on invested capital.
E)the after-tax cost of the interest payments on debt.
Q4) The following data pertain to Corkscrew Corporation:
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Chapter 14: Decision Making: Relevant Costs and Benefits
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Q1) The amount of joint cost allocated to Nuts and Bolts,respectively,would be:
A)$32,000 and $40,000.
B)$32,000 and $48,000.
C)$48,000 and $32,000.
D)$40,000 and $32,000.
E)$40,000 and $40,000.
Q2) Allegiance,Inc.has $125,000 of inventory that suffered minor smoke damage from a fire in the warehouse.The company can sell the goods "as is" for $45,000;alternatively,the goods can be cleaned and shipped to the firm's outlet center at a cost of $23,000.There the goods could be sold for $80,000.What alternative is more desirable and what is the relevant cost for that alternative?
A)Sell "as is," $125,000.
B)Clean and ship to outlet center,$23,000.
C)Clean and ship to outlet center,$103,000.
D)Clean and ship to outlet center,$148,000.
E)Neither alternative is desirable,as both produce a loss for the firm.
Q3) Sophisticates' Corner sells clothing,shoes,and accessories at a suburban location near Boston.Information for the just concluded calendar year follows.
Q4) The following costs relate to a variety of decision settings:
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Chapter 15: Target Costing and Cost Analysis for Pricing Decisions
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Q1) The following costs relate to Southside Company: Variable manufacturing cost,$30;variable selling and administrative cost,$8;applied fixed manufacturing overhead,$15;and allocated fixed selling and administrative cost,$4.If Southside uses absorption manufacturing-cost pricing formulas,the company's markup percentage would be computed on the basis of:
A)$30.
B)$38.
C)$45.
D)$57.
E)some other amount.
Q2) Algeria Transport Company has average invested capital of $800,000 and a target return on investment of 15%.The total cost per unit is $20 based on a volume level of 25,000 units.Albany's markup percentage on total cost is:
A)9.375%.
B)24.0%.
C)47.5%.
D)62.5%.
E)some other amount.
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Chapter 16: Capital Expenditure Decisions
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Q1) The Modified Accelerated Cost Recovery System (MACRS)assumes that,on average,assets will be placed in service:
A)at the beginning of the tax year.
B)three months into the tax year.
C)halfway through the tax year.
D)at the end of the tax year.
E)in the next tax year.
Q2) Consider the following statements about depreciation tax shields:
I.A depreciation tax shield provides distinct benefits to a business.
II.A depreciation tax shield should be ignored when doing a net-present-value analysis.
III.A depreciation tax shield can occur in more than one year. Which of the above statements is (are)correct?
A)I only.
B)II only.
C)III only.
D)I and II.
E)I and III.
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Chapter 17: Allocation of Support Activity Costs and Joint Costs
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Q1) When allocating service department costs,companies should use actual costs rather than budgeted costs,and separate rates for variable and fixed costs.
A)True
B)False
Q2) The direct method ignores the fact that some service departments provide service to other service departments.
A)True
B)False
Q3) Eastside Hospital has two service departments (Patient Records and Accounting)and two "production" departments (Internal Medicine and Surgery).Which of the following allocations would likely take place under the reciprocal-services method of cost allocation?
A)Allocation of Accounting cost to Patient Records.
B)Allocation of Patient Records cost to Internal Medicine.
C)Allocation of Surgery cost to Accounting.
D)Allocation of Internal Medicine cost to Surgery.
E)Allocations "A" and "B" abovE.
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Chapter 19: compound Interest and the Concept of Present
Value
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Q1) The time value of money and present value are important business concepts.
Required:
Differentiate between the concepts discounting and compounding.
Q2) You received a $5,000 loan at the end of each of your four years of college.Your grandparents agreed to pay off your loans at the end of your fourth year of school.Assume a 4% annual compound interest rate on student loans.How much will they have to deposit when you start school so that they will have enough money to pay off your loans after four years? Their interest rate is 6% compounded annually.
A)$20,000.
B)$21,235.
C)$16,818.
D)$15,000.
E)none of thesE.
Q3) The time value of money and present value are important business concepts.
Required:
Briefly explain these concepts to someone with a limited business background.
Q4) The time value of money and present value are important business concepts.
Required:
Differentiate between the concepts discounting and compounding.
Page 21
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Chapter 20: Inventory Management
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Q1) When graphing the EOQ,which of the following statements is false?
A)Holding costs are a downward sloping line to the right.
B)The EOQ is represented by the minimum total cost.
C)Ordering costs are a downward sloping line to the right.
D)Average inventory on hand results in higher holding costs.
E)As order size increases,so does average inventory on hand.
Q2) Economic Order Quantity,timing of orders and safety stock are three important considerations in inventory management.
Required:
A.EOQ is a mathematical model that minimizes the costs of ordering and holding inventory.Timing of orders takes into account any lead time necessary between placing and receiving the inventory ordered.Safety stock allows for fluctuations in usage and minimizes losses due to lost production.
A.Explain each of these considerations.
B.How is EOQ affected by the timing of orders and safety stock?
B.The need for a lead time when placing orders and maintenance of a safety stock will alter the selection of the EOQ.Proper weighting of the three will result in cost minimization by the company.
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