Financial Decision Making
Question Bank
Course Introduction
Financial Decision Making is a comprehensive course that equips students with the analytical tools and frameworks needed to make informed financial choices in both personal and organizational contexts. The course covers fundamental concepts such as time value of money, risk and return analysis, capital budgeting, and financial statement interpretation. Students learn to evaluate investment opportunities, assess financial performance, and solve real-world problems through modern decision-making techniques. Emphasis is placed on integrating theory with practical application, preparing students to navigate complex financial environments and contribute strategically in their future careers.
Recommended Textbook
Managerial Accounting 9th Canadian Edition by Ray Garrison
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14 Chapters
1982 Verified Questions
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Page 2
Chapter 1: Managerial Accounting and the Business Environment
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Sample Questions
Q1) Obtaining feedback is generally identified most directly with which of these functions of management?
A) Planning
B) Directing and motivating
C) Controlling
D) Decision making
Answer: C
Q2) A business plan is usually formalized by means of which of the following management activities?
A) Strategic planning
B) Directing
C) Motivating
D) Controlling
Answer: A
Q3) Supply chain management involves acquiring and bringing inside the company all of the processes that bring value to customers.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Cost Terms, Concepts, and Classifications
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Sample Questions
Q1) How would the cost of rent for a manufacturing plant generally be classified?
A) A product cost but not a prime cost.
B) Neither a product nor prime Cost.
C) A prime cost but not a product cost.
D) Both a prime cost and product cost.
Answer: A
Q2) To what does the term differential cost refer?
A) A difference in cost that results from selecting one alternative instead of another.
B) The benefit forgone by selecting one alternative instead of another.
C) A cost that does not entail any dollar outlay,but which is relevant to the decision-making process.
D) A cost that continues to be incurred even though there is no activity.
Answer: A
Q3) What was the cost of goods sold (in thousands of dollars)for the year?
A) $610.
B) $410.
C) $490.
D) $570.
Answer: B
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Page 4
Chapter 3: Systems Design: Job-Order Costing
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Sample Questions
Q1) Which of the following contain(s)the detailed cost data that support the Work in Process control account?
A) Job cost sheets.
B) The Manufacturing Overhead account.
C) The Finished Goods inventory account.
D) Purchase requisitions.
Answer: A
Q2) How much of any underapplied or overapplied overhead would have been due to the fact that the estimated overhead costs were different from the actual?
A) $4,000.
B) $6,000.
C) $10,000.
D) $14,000.
Answer: A
Q3) The labour time ticket contains a detailed summary of the direct and the indirect labour hours of an employee.
A)True
B)False
Answer: True
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Chapter 4: Systems Design: Process Costing
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Sample Questions
Q1) Job-costing systems tend to produce more accurate product cost information compared to process costing systems.On the other hand they also tend to be more costly systems than processing costing systems.
Required:
Comment on the two observations.
Q2) Department 2 is the second of three sequential processes.All materials are added at the beginning of processing in Department 2.During October,Department 2 reported the following data: The company uses the weighted-average method in its process costing system.To the nearest cent,what is the cost per equivalent unit on the production report for conversion costs?
A) $5.51.
B) $6.45.
C) $6.30.
D) $7.38.
Q3) $112,000 ÷ 28,000 EUs = $4 per EU
Q4) If all units go through all processing departments,then the processing departments are arranged in a parallel,rather than sequential,fashion.
A)True
B)False
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Chapter 5: Activity-Based Costing: A Tool to Aid Decision Making
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Sample Questions
Q1) (Appendix 5B)The total cost of a unit of product P85G under the company's traditional costing system is closest to:
A) $146.97
B) $102.58
C) $101.69
D) $80.50
Q2) (Appendix 5B)The unit product cost of product U86Y under the company's traditional costing system is closest to:
A) $71.15
B) $55.50
C) $75.86
D) $38.00
Q3) Activity-based costing uses a number of activity cost pools,each of which is allocated to products on the basis of direct labour hours.
A)True
B)False
Q4) Unit-level production activities are performed each time a unit is made. A)True
B)False
7
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Chapter 6: Cost Behaviour: Analysis and Use
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Sample Questions
Q1) At the level of sales for the third quarter,how much in additional fixed selling expenses could Sorter Company have afforded to spend and still would have reported $41,500 operating income?
A) $50,000.
B) $87,750.
C) $91,500.
D) $96,250.
Q2) What is the gross margin of Evans Retail Stores,Inc.,for the first quarter?
A) $140,000.
B) $190,000.
C) $210,000.
D) $220,000.
Q3) Using the high-low method,what is the fixed portion of the electrical cost each month?
A) $190.
B) $280.
C) $400.
D) $760.
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8
Chapter 7: Cost-Volume-Profit Relationships
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Sample Questions
Q1) Which of the following is defined as the ratio of fixed expenses to the unit contribution margin?
A) Break-even point in unit sales.
B) Profit margin.
C) Contribution margin ratio.
D) Margin of safety.
Q2) The formula for the break-even point is the same as the formula to attain a given target operating profit for the special case where the target operating profit is zero.
A)True
B)False
Q3) The break-even point is closest to which of the following?
A) 19,111 units.
B) 10,118 units.
C) 21,500 units.
D) 24,000 units.
Q4) The basic cost-volume-profit model assumes no change in inventories when the model is applied to a manufacturing company.
Required:
Explain the reasoning behind this assumption.
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Chapter 8: Variable Costing: A Tool for Management
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Sample Questions
Q1) Last year,Stephen Company had 20,000 units in its ending inventory.During the year,Stephen Company's variable production costs were $12 per unit.The fixed manufacturing overhead cost was $8 per unit in the beginning inventory.The company's operating income for the year was $9,600 higher under variable costing than it was under absorption costing.Given these facts,what must have been the number of units of product in the beginning inventory last year?
A) 18,800 units.
B) 19,200 units.
C) 19,520 units.
D) 21,200 units.
Q2) The unit product cost under absorption costing contains no element of fixed manufacturing overhead cost.
A)True
B)False
Q3) What was the contribution margin per unit?
A) $17.50.
B) $25.70.
C) $27.50.
D) $32.50.
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Chapter 9: Budgeting
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Sample Questions
Q1) In the merchandise purchases budget,the required purchases (in units)for a period can be determined by subtracting the beginning merchandise inventory (in units)from the budgeted sales (in units).
A)True
B)False
Q2) When using the participative budget approach,it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioural responses from employees.
A)True
B)False
Q3) The beginning cash balance is not included on the cash budget since the cash budget deals exclusively with cash flows rather than with balance sheet amounts.
A)True
B)False
Q4) In a not-for-profit entity a budget can be prepared either on an expenditure basis or on a program basis.Discuss.
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11
Chapter 10: Standard Costs and Overhead Analysis
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Sample Questions
Q1) What was the fixed overhead budget variance for the year?
A) $8,000 favourable.
B) $10,000 unfavourable.
C) $17,000 unfavourable.
D) $74,000 favourable.
Q2) A labour efficiency variance resulting from the use of poor quality materials should be charged to which/whom?
A) The production manager.
B) The purchasing agent.
C) Manufacturing overhead.
D) The engineering department.
Q3) What was the materials quantity variance for the month?
A) $6,550 unfavourable.
B) $6,600 unfavourable.
C) $15,982 unfavourable.
D) $16,104 unfavourable.
Q4) One cause of an unfavourable overhead volume variance would be increases in cost for fixed overhead items.
A)True
B)False
Page 12
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Chapter 11: Reporting for Control
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Sample Questions
Q1) Suppose that Vega can sell 9,000 wheels each month to outside consumers,so transfers to the Walsh Division cut into outside sales.What should be the lowest acceptable transfer price from the perspective of the Vega Division?
A) $28.00.
B) $31.75.
C) $41.00.
D) $42.00.
Q2) What is Company A's residual income?
A) $9,000.
B) $21,000.
C) $24,000.
D) $45,000.
Q3) What will be the total prevention cost appearing on the quality cost report?
A) $69,000.
B) $139,000.
C) $148,000.
D) $178,000.
Q4) The salary paid to a store manager is a traceable fixed expense of the store.
A)True
B)False
Page 13
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Chapter 12: Relevant Costs for Decision Making
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Sample Questions
Q1) Manor Company plans to discontinue a department that has a contribution margin of $24,000 and $48,000 in fixed costs.Of the fixed costs,$21,000 cannot be avoided.What would be the effect of discontinuing the department on Manor's overall operating income?
A) An increase of $3,000.
B) A decrease of $3,000.
C) An increase of $24,000.
D) A decrease of $24,000.
Q2) Two or more different products that are manufactured in the same production period are known as joint products.
A)True
B)False
Q3) Assume that discontinuing the manufacture and sale of Product J will not affect the sale of other products.If the company discontinues Product J,what will be the change in annual operating income due to this decision?
A) $25,000 decrease.
B) $145,000 increase.
C) $170,000 decrease.
D) $315,000 decrease.
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Page 14
Chapter 13: Capital Budgeting Decisions
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Sample Questions
Q1) Projects with shorter payback periods are always more profitable than projects with longer payback periods.
A)True
B)False
Q2) Which of the following statements is(are)correct? I.Project A is acceptable according to the net present value method.
II)Project A has an internal rate of return greater than 14%.
A) I only.
B) II only.
C) Both I and II.
D) Neither I nor II.
Q3) What is the present value of the before-tax proceeds that will be received on the sale of the old computer?
A) $0.
B) $1,200.
C) $2,800.
D) $4,000.
Q4) Monson Company is considering three investment opportunities with cash flows as described below: (Ignore income taxes in this problem.)
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Chapter 14: Financial Statement Analysis
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Sample Questions
Q1) Mariah Company had a times interest earned ratio of 3.0 for the year just ended.The company's tax rate was 40%,and the interest expense for the year was $25,000.What was Mariah Company's after-tax net income?
A) $25,000.
B) $30,000.
C) $50,000.
D) $75,000.
Q2) Starrs Company has current assets of $300,000 and current liabilities of $200,000.Which of the following transactions would increase its working capital?
A) Prepayment of $50,000 of next year's rent.
B) Refinancing $50,000 of short-term debt with long-term debt.
C) Acquisition of land valued at $50,000 by issuing new common shares.
D) Purchase of $50,000 of marketable securities for cash.
Q3) A positive fully diluted earnings per share can sometimes exceed basic (undiluted)earnings per share.
A)True
B)False
Q4) Financial statements for Lowe Company appear below:
Q5) Financial statements for Qiang Company appear below:
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