Corporate Finance
Chapter Exam Questions
Course Introduction
Corporate Finance explores the financial principles and strategies that companies use to maximize value for shareholders and achieve long-term success. The course covers fundamental topics such as financial statement analysis, capital budgeting, risk and return assessment, cost of capital, capital structure, working capital management, and dividend policy. Students will develop analytical skills in evaluating investment opportunities, raising funds, and making strategic decisions that impact a firm's financial health. Real-world case studies and practical applications provide insight into the challenges and solutions encountered by financial managers in modern corporations.
Recommended Textbook
Managerial Accounting 16th Edition by Ray H Garrison
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Page 2
Chapter 1: Managerial Accounting and Cost Concepts
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Sample Questions
Q1) The prime cost for November was:
A) $79,000
B) $59,000
C) $67,000
D) $87,000
Answer: C
Q2) For financial reporting purposes,the total amount of period costs incurred to sell 4,000 units is closest to:
A) $12,200
B) $7,800
C) $4,400
D) $8,100
Answer: A
Q3) If 5,000 units are produced,the total amount of manufacturing overhead cost is closest to:
A) $20,500
B) $23,000
C) $18,000
D) $19,250
Answer: A
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Chapter 2: Job-Order Costing: Calculating Unit Production Costs
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Sample Questions
Q1) The estimated total manufacturing overhead for the Finishing Department is closest to:
A) $71,500
B) $52,000
C) $34,794
D) $19,500
Answer: A
Q2) The amount of overhead applied in the Customizing Department to Job T898 is closest to:
A) $450.00
B) $119,700.00
C) $665.00
D) $215.00
Answer: C
Q3) The formula for computing the predetermined overhead rate is:
Predetermined overhead rate = Estimated total amount of the allocation base ÷
Estimated total manufacturing overhead cost
A)True
B)False
Answer: False
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Chapter 3: Job-Order Costing: Cost Flows and External Reporting
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Sample Questions
Q1) If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied,then manufacturing overhead would be considered to be overapplied.
A)True
B)False
Answer: False
Q2) The overhead for the year was:
A) $714 overapplied
B) $7,626 underapplied
C) $714 underapplied
D) $7,626 overapplied
Answer: B
Q3) In the Schedule of Cost of Goods Manufactured,Raw materials used in production = Beginning raw materials inventory + Purchases of raw materials Ending raw materials inventory.
A)True
B)False
Answer: True
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Chapter 4: Process Costing
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Sample Questions
Q1) Hache Corporation uses the weighted-average method in its process costing system.The first processing department,the Welding Department,started the month with 17,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs.The conversion cost in this beginning work in process inventory was $7,480.An additional 89,000 units were started into production during the month and 92,000 units were completed in the Welding Department and transferred to the next processing department.There were 14,000 units in the ending work in process inventory of the Welding Department that were 90% complete with respect to conversion costs.A total of $202,400 in conversion costs were incurred in the department during the month. The cost per equivalent unit for conversion costs for the month is closest to:
A) $1.965
B) $2.200
C) $2.007
D) $2.274
Q2) What was the cost per equivalent unit for conversion during the month?
A) $5.45
B) $6.95
C) $4.00
D) $3.05
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Page 6
Chapter 5: Cost-Volume-Profit Relationships
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Sample Questions
Q1) If the company sells 4,500 units,its total contribution margin should be closest to:
A) $85,500
B) $24,652
C) $87,400
D) $81,600
Q2) The break-even in monthly unit sales is closest to:
A) 2,328 units
B) 1,342 units
C) 3,441 units
D) 2,200 units
Q3) Assume the company's target profit is $14,000.The unit sales to attain that target profit is closest to:
A) 7,746 units
B) 2,556 units
C) 4,706 units
D) 3,815 units
Q4) A decrease in the number of units sold will decrease the break-even point.
A)True B)False
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Chapter 6: Variable Costing and Segment Reporting: Tools for Management
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Sample Questions
Q1) Under variable costing,only variable production costs are treated as product costs. A)True
B)False
Q2) What is the unit product cost for the month under variable costing?
A) $99 per unit
B) $138 per unit
C) $108 per unit
D) $147 per unit
Q3) The unit product cost under variable costing is closest to:
A) $34.00
B) $39.00
C) $21.00
D) $26.00
Q4) The net operating income (loss)under variable costing in Year 1 is closest to:
A) $144,000
B) $2,000
C) $26,000
D) $174,000
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Chapter 7: Super-Variable Costing
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Q1) Nurre Corporation manufactures and sells one product.In the company's first year of operations,the variable cost consisted solely of direct materials of $88 per unit.The annual fixed costs were $729,000 of direct labor cost,$1,917,000 of fixed manufacturing overhead expense,and $814,000 of fixed selling and administrative expense.The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses.During its first year of operations,the company produced 27,000 units and sold 22,000 units.The company's only product is sold for $247 per unit.
Required:
a.Assume the company uses super-variable costing.Compute the unit product cost for the year and prepare an income statement for the year.
b.Assume that the company uses an absorption costing system that assigns $27 of direct labor cost and $71 of fixed manufacturing overhead to each unit that is produced.Compute the unit product cost for the year and prepare an income statement for the year.
Q2) Super-variable costing is a costing method mat treats direct labor and manufacturing overhead costs as product costs.
A)True
B)False
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Page 9
Chapter 8: Master Budgeting
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Sample Questions
Q1) If the budgeted direct labor time for December is 4,000 hours,then the predetermined manufacturing overhead per direct labor-hour for December would be:
A) $9.20
B) $30.70
C) $23.20
D) $1.70
Q2) One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks.
A)True
B)False
Q3) In June the company has budgeted to produce 22,000 Pods.Budgeted direct labor costs incurred in June would be:
A) $470,400
B) $295,680
C) $240,000
D) $211,200
Q4) The master budget consists of a number of separate but interdependent budgets. A)True
B)False
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Chapter 9: Flexible Budgets and Performance Analysis
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Sample Questions
Q1) Sherburne Snow Removal's cost formula for its vehicle operating cost is $2,510 per month plus $371 per snow-day.For the month of March,the company planned for activity of 18 snow-days,but the actual level of activity was 17 snow-days.The actual vehicle operating cost for the month was $8,460.The vehicle operating cost in the flexible budget for March would be closest to:
A) $8,817
B) $9,188
C) $8,460
D) $8,678
Q2) The spending variance for wages and salaries in July would be closest to:
A) $30 U
B) $2,120 F
C) $30 F
D) $2,120 U
Q3) The revenue variance for September would be closest to:
A) $210 U
B) $1,990 F
C) $1,990 U
D) $210 F
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Chapter 10: Standard Costs and Variances
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Sample Questions
Q1) The standard number of machine-hours allowed for July production is closest to:
A) 1,600 hours
B) 1,700 hours
C) 1,300 hours
D) 1,500 hours
Q2) The materials price variance for November is:
A) $5,548 U
B) $6,160 U
C) $6,160 F
D) $5,548 F
Q3) What is ChocO's labor rate variance?
A) $902 Favorable
B) $2,880 Favorable
C) $3,782 Favorable
D) $14,432 Favorable
Q4) The labor rate variance for the month is closest to:
A) $1,312 F
B) $1,312 U
C) $1,216 U
D) $1,216 F
Page 12
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Chapter 11: Performance Measurement in Decentralized Organizations
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Sample Questions
Q1) The average operating assets for Year 2 were:
A) $1,000,000
B) $1,080,000
C) $1,200,000
D) $1,388,889
Q2) Net operating income is income before interest and taxes.
A)True
B)False
Q3) Turk's return on investment for the year was:
A) 4%
B) 15%
C) 36%
D) 20%
Q4) Last year a company had sales of $600,000,a turnover of 3.6,and a return on investment of 18%.The company's net operating income for the year was:
A) $166,667
B) $108,000
C) $30,000
D) $15,000
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Chapter 12: Differential Analysis: The Key to Decision Making
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Sample Questions
Q1) How much of the unit product cost of $54.90 is relevant in the decision of whether to make or buy the part?
A) $37.80 per unit
B) $46.70 per unit
C) $54.90 per unit
D) $19.00 per unit
Q2) Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called:
A) sunk costs.
B) opportunity costs.
C) avoidable costs.
D) irrelevant costs.
Q3) Payment of overtime to a worker in order to relax a production constraint could increase the profits of a company.
A)True
B)False
Q4) Variable costs are always relevant costs in decisions.
A)True
B)False
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Chapter 13: Capital Budgeting Decisions
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Sample Questions
Q1) Discounted cash flow techniques automatically take into account recovery of the initial investment.
A)True B)False
Q2) The net present value method assumes that cash flows from a project are immediately reinvested at a rate of return equal to the internal rate of return.
A)True B)False
Q3) The net present value of the alternative of purchasing the new system is closest to:
A) $(1,076,495)
B) $(1,236,495)
C) $(1,169,895)
D) $(969,895)
Q4) The net present value of Project A is:
A) $51,000
B) $60,120
C) $55,560
D) $94,450
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) The net cash provided by (used in)operating activities for the year was:
A) $117
B) $45
C) $36
D) $116
Q2) Which of the following is correct regarding the operating activities section of the statement of cash flows?
A) The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be subtracted from net income
B) The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be added to net income
C) The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be subtracted from net income
D) The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be added to net income
Q3) Negative free cash flow does not automatically signal poor performance.
A)True B)False
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) The company's return on equity for Year 2 is closest to:
A) 67.25%
B) 2.27%
C) 1.47%
D) 4.19%
Q2) The working capital at the end of Year 2 is:
A) $270
B) $500
C) $770
D) $740
Q3) As the inventory turnover increases,the average sales period decreases.
A)True
B)False
Q4) Narstad Corporation's times interest earned ratio for Year 2 was closest to:
A) 11.0
B) 10.0
C) 18.0
D) 7.0
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Chapter 16: Cost of Quality
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Sample Questions
Q1) An increase in appraisal costs will usually result in an increase in:
A) prevention costs.
B) internal failure costs.
C) external failure costs.
D) opportunity costs.
Q2) Inspection of products would be classified as a(n):
A) prevention cost.
B) appraisal cost.
C) internal failure cost.
D) external failure cost.
Q3) Which of the following would be classified as a prevention cost on a quality cost report?
A) Net cost of spoilage.
B) Supervision of testing and inspection activities.
C) Liability arising from defective products.
D) Technical support provided to suppliers.
Q4) To minimize its total quality costs,a company should usually try to redistribute its quality costs more toward prevention and appraisal.
A)True
B)False
Page 18
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Chapter 17: Activity-Based Absorption Costing
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Sample Questions
Q1) The predetermined overhead rate under the traditional costing system is closest to:
A) $11.71
B) $38.69
C) $171.89
D) $23.87
Q2) The manufacturing overhead that would be applied to a unit of product M09K under the activity-based costing system is closest to:
A) $76.73
B) $92.08
C) $11.00
D) $168.81
Q3) The unit product cost of product N32Y under the activity-based costing system is closest to:
A) $136.00
B) $76.70
C) $59.30
D) $136.16
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Chapter 18: The Predetermined Overhead Rate and Capacity
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Q1) If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year,then the amount of manufacturing overhead charged to Job Q20L is closest to:
A) $23,673.90
B) $26,812.98
C) $28,589.98
D) $28,134.20
Q2) The predetermined overhead rate based on hours at capacity is closest to:
A) $84.60 per hour
B) $61.10 per hour
C) $61.54 per hour
D) $44.44 per hour
Q3) The cost of unused capacity that would be reported as a period expense on the income statement prepared for internal management purposes would be closest to:
A) $2,450
B) $0
C) $24,975
D) $25,575
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Chapter 19: Job-Order Costing: a Microsoft Excel-Based Approach
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Q1) In the Excel,or spreadsheet,approach to recording financial transactions,the cost of goods sold is recorded as a decrease in the Finished Goods column and as a decrease in the Retained Earnings column.
A)True
B)False
Q2) In the Excel,or spreadsheet,approach to recording financial transactions,the Manufacturing Overhead account is used to record two things-all actual overhead expenses and the amount of manufacturing overhead applied to production using the predetermined overhead rate.
A)True
B)False
Q3) In the Excel,or spreadsheet,approach to recording financial transactions,manufacturing overhead applied is recorded as an increase in the Work in Process column and as a decrease in the Manufacturing Overhead column. A)True
B)False
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Chapter 20: Fifo Method
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Q1) In December,one of the processing departments at Bonine Corporation had ending work in process inventory of $32,000.During the month,$264,000 of costs were added to production and the cost of units transferred out from the department was $257,000.The company uses the FIFO method in its process costing system.
Required:
Construct a cost reconciliation report for the department for the month of December.
Q2) What are the Fermenting Department's equivalent units (gallons)of production related to materials for May?
A) 442,000
B) 460,000
C) 474,000
D) 492,000
Q3) The cost per equivalent unit for conversion costs for the first department for the month is closest to:
A) $48.79
B) $45.20
C) $44.68
D) $43.05
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22
Chapter 21: Service Department Allocations
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Q1) Assuming that SJM allocates service department costs using the direct method,the total cost allocated from Maintenance to Processing would be closest to:
A) $21,600
B) $18,783
C) $26,400
D) $20,571
Q2) Suppose the company uses the direct method of allocation.The amount of Custodial Services Department cost allocated to Operating Department 2 would be:
A) $25,920
B) $27,000
C) $28,800
D) $21,600
Q3) Assuming the step-down method is used and Building and Grounds costs are allocated first,the amount of Building and Grounds costs allocated to the Cafeteria would be:
A) $0
B) $4,800
C) $4,640
D) $5,568
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Chapter 22: Analyzing Mixed Costs
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Sample Questions
Q1) Using the high-low method,the fixed portion of the electrical cost each month would be:
A) $400
B) $760
C) $280
D) $190
Q2) (The R<sup>2</sup> (i.e.,R-squared)varies from 0% to 100%,and the lower the percentage,the better the fit of the data to a straight line.
A)True
B)False
Q3) In describing the cost formula equation,Y = a + bX,which of the following is correct:
A) "Y" is the independent variable.
B) "a" is the variable cost per unit.
C) "a" and "b" are valid for all levels of activity.
D) in the high-low method, "b" equals the change in cost divided by the change in activity.
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24
Chapter 23: Time-Driven Activity-Based Costing: a
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Q1) On the Customer Cost Analysis report in time-driven activity-based costing,the Processing Orders cost assigned to Customer X would be closest to:
A) $246.00
B) $150.33
C) $8.20
D) $134.84
Q2) On the Capacity Analysis report in time-driven activity based costing,the "unused capacity in minutes" would be closest to:
A) 469,180 minutes
B) 510,000 minutes
C) 550,820 minutes
D) 530,410 minutes
Q3) On the Customer Cost Analysis report in time-driven activity-based costing,the Preparing Deliveries cost assigned to Customer R would be closest to:
A) $12.00
B) $108.00
C) $82.67
D) $128.00
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Chapter 24: Predetermined Overhead Rates and Overhead
Analysis in a Standard Costing System
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Q1) The denominator activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate was:
A) 7,600 hours
B) 7,800 hours
C) 8,000 hours
D) 7,200 hours
Q2) The fixed overhead budget variance is:
A) $14,000 F
B) $43,560 U
C) $43,560 F
D) $14,000 U
Q3) The fixed overhead volume variance is:
A) $42,675 U
B) $57,675 U
C) $42,675 F
D) $57,675 F
Q4) An unfavorable volume variance means that the company operated at an activity level greater than that planned for the period.
A)True
B)False
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Chapter 25: Standard Cost Systems: a Financial Reporting
Perspective Using Microsoft Excel
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Q1) The net operating income for the year is closest to:
A) $155,660
B) $178,434
C) $68,600
D) $112,020
Q2) When recording the raw materials purchases in transaction (a)above,the Raw Materials inventory account will increase (decrease)by:
A) ($92,590)
B) $108,350
C) $92,590
D) ($108,350)
Q3) When recording the direct labor costs,the Cash account will increase (decrease)by:
A) ($286,740)
B) ($292,855)
C) $286,740
D) $292,855
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27
Chapter 26: Transfer Pricing
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Q1) Division R of Harris Corporation has the capacity for making 40,000 wheel sets per year and regularly sells 36,000 each year on the outside market.The regular selling price on the outside market is $89 per wheel set,and the variable production cost per unit is $56.Division S of Harris Corporation currently buys 6,000 wheel sets (of the kind made by Division R)yearly from an outside supplier at a price of $85 per wheel set.If Division S were to buy the 6,000 wheel sets it needs annually from Division R at $83 per wheel set,the change in annual net operating income for the company as a whole,compared to what it is currently,would be:
A) $108,000
B) $174,000
C) $162,000
D) $96,000
Q2) Suppose that Division S can sell all that it can produce to outside customers.If Division S sells to Division B at a price of $28 per unit,the company as a whole will be:
A) worse off by $80,000 each period.
B) worse off by $70,000 each period.
C) better off by $20,000 each period.
D) worse off by $20,000 each period.
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Chapter 27: Service Department Charges
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Q1) The medical services department of Fischer Company budgeted $25 of variable medical expenses per employee for May,based on 2,000 employees in operating departments.During May an average of 1,980 employees were employed in operating departments.Actual variable medical expenses totaled $50,700 for the month.How much variable medical expenses should be charged to operating departments at the end of May for performance evaluation purposes?
A) $50,700
B) $49,500
C) $50,000
D) $51,212
Q2) For performance evaluation purposes,the actual fixed costs of a service department should be charged to the departments that consume the service in proportion to the actual services provided to the consuming departments during the period.
A)True
B)False
Q3) In service department cost allocations,sales dollars should be used as an allocation base whenever possible.
A)True
B)False
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Chapter 28: Pricing Decisions
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Q1) A product's economic value to the customer is the variable cost of the product plus the value of what differentiates the product from that alternative.
A)True
B)False
Q2) The target costing approach was developed in recognition of two important characteristics of markets and costs.First,many companies have less control over price than they like to think.Second,most of a product's cost is determined when it is designed.
A)True
B)False
Q3) The markup over cost under the absorption costing approach would decrease if the unit product cost increases,holding everything else constant.
A)True
B)False
Q4) Under the absorption approach to cost-plus pricing described in the text,all fixed costs are included in the cost base in setting a selling price.
A)True
B)False
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Chapter 29: The Concept of Present Value
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Q1) The present value of a cash flow will never be greater than the future dollar amount of the cash flow.
A)True
B)False
Q2) (Ignore income taxes in this problem.)A company wants to have $40,000 at the end of a five-year period through investment of a single sum now.How much needs to be invested in order to have the desired sum in five years,if the money can be invested at 10%:
A) $10,551
B) $8,000
C) $24,840
D) $12,882
Q3) (Ignore income taxes in this problem.)How much would you have to invest today in the bank at an interest rate of 8% to have an annuity of $4,800 per year for 7 years,with nothing left in the bank at the end of the 7 years? Select the amount below that is closest to your answer.
A) $33,600
B) $2,798
C) $24,989
D) $31,111
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Chapter 30: Income Taxes and the Present Value Method
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150 Verified Questions
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Sample Questions
Q1) The income tax expense in year 2 is:
A) $129,000
B) $15,000
C) $18,000
D) $96,000
Q2) The income tax expense in year 3 is:
A) $21,000
B) $9,000
C) $6,000
D) $3,000
Q3) The total cash flow net of income taxes in year 3 is:
A) $70,000
B) $49,000
C) $89,000
D) $61,000
Q4) The net present value of the entire project is closest to:
A) $140,000
B) $120,440
C) $75,830
D) $63,570
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Chapter 31: the Direct Method of Determining the Net Cash
Provided by Operating Activities
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Sample Questions
Q1) Last year Anderson Corporation reported a cost of goods sold of $100,000.The company's inventory at the beginning of the year was $11,000,and its inventory at the end of the year was $19,000.The prepaid expense account increased by $2,000 between the beginning and end of the year,and the accounts payable account decreased by $4,000.Cost of goods sold adjusted to the cash basis under the direct method would be:
A) $94,000
B) $106,000
C) $112,000
D) $110,000
Q2) On its statement of cash flows,what amount should Howard show for its net sales adjusted to a cash basis (i.e.,cash received from sales)?
A) $616,000
B) $623,000
C) $625,000
D) $595,000
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