Financial Management
Exam Solutions
Course Introduction
Financial Management is a foundational course that explores the principles and practices involved in the effective management of an organizations financial resources. It covers essential topics such as financial statement analysis, budgeting, capital structure, investment decisions, risk management, and working capital management. Students learn how to apply financial theories to real-world business scenarios, make informed financial decisions, and develop strategies to maximize shareholder value while maintaining fiscal responsibility and ethical standards. The course also introduces techniques for evaluating financial performance and understanding the impact of financial markets and instruments on organizational success.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 8th Canadian Edition by Srikant M. Datar
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22 Chapters
3872 Verified Questions
3872 Flashcards
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Chapter 1: The Accountants Vital Role in Decision Making
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) Preparing a report comparing actual and budgeted waste percentages from a chemical process in a herbicide plant.
Answer: Answers: A
Q2) To be successful a company should be
A)customer driven.
B)"driven" by the board of directors.
C)employee driven.
D)management driven.
E)executive driven.
Answer: A
Q3) The value chain includes the following functions: research and development; design of products, services, or processes; production; marketing; distribution; customer service; and management satisfaction.
A)True
B)False
Answer: False
Q4) cost of paper used in packing cartons to ship books
Answer: Answers: A
Q5) amortization of the wood used in the manufacturing plant
Answer: Answers: B
3
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Chapter 2: An Introduction to Cost Terms and Purposes
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Sample Questions
Q1) For purposes of calculating inventory costs under ASPE/IFRS, only production costs can be used.
A)True
B)False
Answer: True
Q2) A manufacturing plant produces two product lines: football equipment and hockey equipment.An indirect cost for the hockey equipment line is the A)material used to make the hockey sticks.
B)labour to bind the shaft to the blade of the hockey stick.
C)shift supervisor for the hockey line.
D)plant supervisor.
E)salesperson travelling expenses.
Answer: D
Q3) What is Frazer's cost of goods manufactured?
A)$536,000
B)$496,000
C)$480,000
D)$476,000
E)$512,000
Answer: C
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Chapter 3: Cost-Volume-Profit Analysis
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Sample Questions
Q1) In a company with low operating leverage
A)fixed costs are high and variable costs are low.
B)small increases in sales lead to large increases in operating income.
C)there is a higher possibility of net loss than a higher-leveraged firm.
D)less risk is assumed than in a highly leveraged firm.
E)companies follow the strategy of replacing variable costs with fixed costs.
Answer: D
Q2) If planned net income is $21,000 and the tax rate is 30%, then planned operating income would be $27,300.
A)True
B)False
Answer: False
Q3) What is the "operating income" assuming 250 people attend and option one is chosen?
A)$4,400
B)$4,350
C)$4,000
D)$6,250
E)$4,750
Answer: B
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Chapter 4: Job Costing
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Sample Questions
Q1) For each cost pool, the indirect cost rate equals the indirect cost pool divided by the cost allocation base.
A)True
B)False
Q2) Budgeted fixed indirect costs remain constant at $150,000 per month.During high-output months variable indirect costs are budgeted at $120,000, and during low-output months budgeted variable costs are $60,000.What are the respective high and low indirect cost rates if budgeted professional labour-hours are 6,000 for high-output months and 2,000 for low-output months?
A)$31.25 per hour, $87.50 per hour
B)$45.00 per hour, $95.00 per hour
C)$45.00 per hour, $105.00 per hour
D)$56.20 per hour, $105.00 per hour
E)$59.00 per hour, $105.00 per hour
Q3) Transferring costs from indirect cost pools to cost objects is called
A)cost allocation.
B)cost control.
C)cost pool.
D)cost factoring.
E)cost processing.
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Chapter 5: Activity-Based Costing and Management
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Sample Questions
Q1) How much of the correspondence cost will be assigned to Department X?
A)$10,000
B)$8,333
C)$25,000
D)$5,000
E)$50,000
Q2) How much of the account verification cost will be assigned to Department Y?
A)$15,000
B)$7,500
C)$100,000
D)$10,000
E)$50,000
Q3) Engineering costs incurred to change product designs are which of the following?
A)market-sustaining costs
B)output unit-level costs
C)batch-level costs
D)product-sustaining (service-sustaining)costs
E)facility-sustaining costs
Q4) How are cost drivers selected in activity-based costing systems?
Q5) Formalize project plan
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Chapter 6: Master Budget and Responsibility Accounting
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Sample Questions
Q1) Frame Antique manufactures picture frames.Sales for May are expected to be 20,000 units of various sizes.Historically, the average frame requires three metres of framing, one square metre of glass, and two square metres of backing.Beginning inventory includes 3,000 metres of framing, 1,000 square metres of glass, and 1,000 square metres of backing.Current prices are $0.20 per metre of framing, $4.00 per square metre of glass, and $1.50 per square metre of backing.Ending inventory should be 150 percent of beginning inventory.Purchases are paid for in the month acquired.Required:
a.Determine the quantity of framing, glass, and backing that is to be purchased during May.
b.Determine the total costs of direct materials for May purchases.
Q2) What are the expected total cash receipts for February?
A)$118,500
B)$89,000
C)$88,500
D)$85,000
E)$80,500
Q3) Few costs are clearly under the sole influence of one manager.
A)True
B)False
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Page 8
Chapter 7: Flexible Budgets, Variances, and Management
Control: I
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Sample Questions
Q1) What is the All Good Things Ltd.direct labour input-efficiency variance?
A)$4,200 U
B)$4,200 F
C)$5,000 U
D)$5,000 F
E)$200 U
Q2) September's direct material flexible-budget variance is
A)$100.00 unfavourable.
B)$100.00 favourable.
C)$75.00 unfavourable.
D)$75.00 favourable.
E)$125.00 unfavourable.
Q3) To prepare budgets based on actual data from past periods is preferred since past inefficiencies are excluded.
A)True
B)False
Q4) A static budget is a budget that can be changed or altered after it is developed.
A)True
B)False
9
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Chapter 8: Flexible Budgets, Variances, and Management
Control: II
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Sample Questions
Q1) In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed.
A)True
B)False
Q2) What is the variable overhead efficiency variance?
A)$8,600 favourable
B)$8,600 unfavourable
C)$141,900 favourable
D)$141,900 unfavourable
E)$11,000 unfavourable
Q3) Which of the following statements is TRUE?
A)The fixed manufacturing sales-volume variance is rarely zero.
B)The difference between the allocated and the budgeted overhead is the production-volume variance.
C)The production-volume variance arises for both fixed and variable costs.
D)The fixed manufacturing overhead sales-volume variance can be written-off to cost of goods sold.
E)The production-volume variance arises only for variable costs.
Q4) How is a budgeted fixed overhead cost rate calculated?
Q5) Explain the meaning of a favourable production-volume variance.
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Chapter 9: Income Effects of Denominator Level on Inventory Valuation
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Sample Questions
Q1) What is the theoretical capacity for the month of September?
A)1,488,000 shoes
B)1,440,000 shoes
C)1,036,800 shoes
D)1,296,000 shoes
E)1,152,000 shoes
Q2) Normal capacity utilization is the expected level of capacity utilization for the current budget period, which is typically one year.
A)True
B)False
Q3) Ace Products sells its products for $22 each.Unit manufacturing costs are: direct materials, $4.00; direct manufacturing labour, $6.00; and variable manufacturing overhead, $3.00.Total fixed manufacturing overhead costs are $60,000 and marketing expenses are $2.00 per unit plus $20,000 per year.The current production level is 25,000 units although only 20,000 units are anticipated to be sold.Required:
a.Prepare an income statement using absorption costing in the gross margin format. b.Prepare an income statement using variable costing in the contribution margin format.
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Page 11
Chapter 10: Analysis of Cost Behaviour
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Sample Questions
Q1) Depreciation of test equipment
Q2) The collection of information on costs and their drivers, gathered through observations and interviews, from departments within an organization is known as the
A)account analysis method.
B)conference method.
C)industrial-engineering method.
D)quantitative analysis method.
E)departmental analysis method.
Q3) What is the estimated total cost at an operating level of 8,000 hours?
A)$39,115
B)$36,670
C)$44,711
D)$43,470
E)$37,125
Q4) Statistical significance of independent variables is determined by comparing the t-value to a threshold called degrees of freedom.
A)True
B)False
Q5) Reinspection
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Chapter 11: Decision Making and Relevant Information
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Sample Questions
Q1) A local accounting firm has offered to do all the billings and collections of a general practitioner.The annual fee will be $12,000.The service will replace the part-time bookkeeper who works for $12 an hour, 10 hours a week.Because outsourcing accounting activities will take place away from the office, the doctor estimates that she will have one additional hour a week to see patients.Normally she sees four patients an hour with an average visit fee of $100.The office is open 50 weeks a year.Since the accounting service will maintain all records in its office, the doctor will no longer need to rent storage space for the office files.The storage space rents for $150 a month.Required:Determine whether or not the doctor should accept the offer to use the accounting service.
Q2) A decision as to whether to insource or outsource is a(n)
A)idle capacity decision.
B)production scheduling analysis.
C)product mix decision.
D)short-run focus decision.
E)make/buy decision.
Q3) Quantitative factors are always expressed in financial terms.
A)True
B)False
Q4) All staff members receive $1,000 per diem for travel
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Chapter 12: Pricing Decisions, Product Profitability Decisions, and Cost Management
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Sample Questions
Q1) The life-cycle reporting process
A)is the same as traditional accounting reporting.
B)matches the company's normal fiscal year reporting.
C)usually includes several accounting reporting periods.
D)tracks costs, but not revenues, from the beginning to the end of a product's or service's life.
E)is used only when yearly costs are not definable.
Q2) When the firm uses the target-costing approach to pricing, the target cost per unit is the difference between the per unit target price and the per unit target
A)contribution margin.
B)operating income.
C)production costs.
D)gross margin.
E)fixed costs.
Q3) When prices are set in a competitive marketplace, product costs are the most important influence on pricing decisions.
A)True
B)False
Q4) What is the primary reason a firm would adopt target costing?
Page 14
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Chapter 13: Strategy, Balanced Scorecard, and Profitability Analysis
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152 Flashcards
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Sample Questions
Q1) Measures of the balanced scorecard's financial perspective include all of the following EXCEPT
A)operating income.
B)customer satisfaction.
C)gross profit percentage.
D)cost reductions.
E)return on investment.
Q2) Research and development cost is an example of an engineered cost.
A)True
B)False
Q3) What is the Tiegs Corporation cost effect of the growth component for conversion costs?
A)$1,500,000 U
B)$0
C)$1,650,000 U
D)$1,650,000 F
E)$1,500,000 F
Q4) Strategy requires integration of product and process development.
A)True B)False
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Chapter 14: Period Cost Allocation
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Sample Questions
Q1) The second-ranked cost object is termed the incremental party and is allocated a proportionate share of common costs based on revenue.
A)True
B)False
Q2) What is the total cost per hour of use for the Cassette Division assuming budgeted usage is the allocation base and a single-rate method is used?
A)$1,050.00
B)$600.00
C)$982.98
D)$382.98
E)$360.00
Q3) Which of the following linear equations would represent the complete reciprocated cost of the Data Processing department?
A)DP = $75,000 + (600/4,700)PM
B)DP = $75,000 + (3,500/16,700)PM
C)DP = $75,000 × (600/4,800)+ $350,000 × (3,340/16,700)
D)PM = $350,000 + (600/16,700)DP
E)PM = $75,000 × (600/4,700)+ $350,000 × (3,340/16,700)
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Chapter 15: Cost Allocation: Joint Products and Byproducts
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Sample Questions
Q1) Sawdust from a furniture manufacturer
Q2) When using the physical measures method, what is Mr.DirtOut's approximate production cost per unit?
A)$1.52
B)$1.54
C)$1.57
D)$1.61
E)$1.01
Q3) What are a joint cost and a splitoff point?
Q4) Using the sales value at splitoff method, what is the gross margin percentage for condensed goat milk at the splitoff point?
A)21.1%
B)55.1%
C)58.1%
D)38.2%
E)41.9%
Q5) Explain the difference between a joint product and a byproduct.Can a byproduct ever become a joint product?
Q6) How should toxic waste be accounted for?
17
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Chapter 16: Revenue and Customer Profitability Analysis
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Sample Questions
Q1) If the market-size variance is $650 F, the sales-mix variance is $500 F, the flexible budget variance is $9,250 F, and the static budget variance is $8,000 U, which of the following is TRUE?
A)The market-share variance is $18,400 U.
B)The sales-volume variance is $17,250 F.
C)The sales-quantity variance is $18,400 U.
D)The sales-volume variance is $17,750 U.
E)The market-share variance is $17,250 U.
Q2) The sales-volume variance plus or minus the static budget amount results in
A)the fixed-budget amount.
B)the flexible-budget amount.
C)an unfavourable/favourable variance.
D)the variable-budget amount.
E)a static budget variance.
Q3) What is the contribution margin for the flexible budget?
A)$1,200,000
B)$4,200,000
C)$5,200,000
D)$5,400,000
E)$5,900,000
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Chapter 17: Process Costing
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Sample Questions
Q1) A key feature in process costing is that
A)total costs are divided by total equivalent units.
B)total units are multiplied by total costs.
C)(total costs times percentage allocated to each unit)are divided by total units.
D)(total units multiplied by the percentage allocated to each unit)is multiplied by total costs.
E)total units are multiplied by individual costs.
Q2) Why do we need to accumulate and calculate unit costs in process costing (and also job costing)?
Q3) How many cushions were started during May at Carnival Furniture?
A)60,000 cushions
B)120,000 cushions
C)140,000 cushions
D)180,000 cushions
E)223,000 cushions
Q4) What is the difference between a weighted-average method of process costing and a first-in, first-out method of process costing?
Q5) Compare and contrast process costing and job order costing.
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Chapter 18: Spoilage, Rework, and Scrap
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Sample Questions
Q1) Under standard costing, there is no need to calculate a cost per equivalent unit.
A)True
B)False
Q2) Spoilage can be a significant cost for many organizations.Discuss when spoilage might happen and how the costs of normal spoilage get allocated.
Q3) The standard-costing method
A)adds a layer of complexity to the calculation of equivalent-unit costs in a process-costing environment.
B)makes calculating equivalent-unit costs unnecessary.
C)requires an analysis of the spoilage costs in beginning inventory.
D)requires an analysis of the spoilage costs in ending inventory.
E)requires a calculation of the cost allocation rate.
Q4) What are the objectives in accounting for spoilage?
Q5) Process costing is simplified when using standard costs.
A)True
B)False
Q6) Rock extracted as a result of mining processing
Q7) Defective jeans sold as seconds
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Chapter 19: Inventory Cost Management Strategies
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Sample Questions
Q1) What are the Wood Furniture Company annual relevant total costs at the economic order quantity?
A)$1,000
B)$1,500
C)$3,000
D)$3,500
E)$2,050
Q2) The annual demand for a company's product is 3,750 units, and monthly demand varies from 200 to 400 units with the following probability of demand:
200 units have a 25 percent probability
300 units have a 50 percent probability
400 units have a 25 percent probability
The EOQ model provides an optimal order quantity of 250 units.The opportunity costs of being out of stock are $2 per unit, with a carrying cost of $13 per unit, and the reorder point is 250 units.Required:
a.Prepare a table showing stockouts, expected stockout costs, related carrying costs, and total costs, at each level of demand if the selected safety stocks are: 0, 50, 100 and 150.
b.What is the best level of safety stock to carry?
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Page 21
Chapter 20: Capital Budgeting: Methods of Investment Analysis
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Sample Questions
Q1) A capital budgeting project will have a positive net present value if its return is less than the hurdle rate.
A)True
B)False
Q2) Next Service Centre is considering purchasing a new computer network for $82,000.It will require additional working capital of $13,000.Its anticipated eight-year life will generate additional client revenue of $33,000 annually with operating costs, excluding depreciation, of $15,000.At the end of eight years, it will have a salvage value of $9,500 and return $5,000 in working capital.Taxes are not considered.Required:
a.If the company has a required rate of return of 14%, what is the net present value of the proposed investment?
b.What is the internal rate of return?
Q3) Relevant cash flows are expected future cash flows that differ among the alternative uses of investment funds.
A)True
B)False
Q4) Describe the purpose, features and benefits of a post investment audit for a capital budgeting project.
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Chapter 21: Transfer Pricing and Multinational Management
Control Systems
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Sample Questions
Q1) Which of the following statements is FALSE?
A)A centralized structure does not empower employees to handle customer complaints directly.
B)A decentralized structure forces top management to lose some control over the organization.
C)Decentralization slows responsiveness to local needs for decision making.
D)The extent to which decisions are pushed downward, and the types of decisions that are pushed down, provide a measure of the level of centralization/decentralization in an organization.
E)Decentralization can increase motivation by allowing managers to exercise greater individual initiative.
Q2) What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division?
A)$9
B)$10
C)$20
D)$16
E)$27
Q3) Variable manufacturing cost plus a mark-up
Page 23
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Chapter 22: Multinational Performance Measurement and Compensation
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Q1) The first step in designing accounting based performance measures is to choose performance measures that align with top management's financial goals.
A)True
B)False
Q2) Pay for performance measures in the best interests of shareholders would, logically, exclude long-term achievement and deferred compensation.
A)True
B)False
Q3) What is the current cost annual depreciation in year 4 dollars?
A)$165,000
B)$135,000
C)$120,000
D)$84,000
E)$106,667
Q4) Good performance measures do not change significantly with the manager's performance but change with factors that are beyond the manager's control.
A)True
B)False
Page 24
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