Financial Management
Pre-Test Questions
Course Introduction
Financial Management is a course designed to provide students with a comprehensive understanding of the principles and techniques used in managing an organizations financial resources. Key topics include financial statement analysis, budgeting, capital structure, working capital management, investment decisions, risk and return analysis, and valuation of assets. The course aims to equip students with the skills to make informed financial decisions, evaluate the financial health of businesses, and understand the impact of financial markets and instruments on organizational strategy. Real-world case studies and practical applications are integrated to enhance decision-making and problem-solving abilities in financial contexts.
Recommended Textbook Cornerstones of Cost Accounting 1st Edition by Don R. Hansen
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Chapter 1: Introduction to Cost Management
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Q1) _______________ is devoted to providing information for external users.
A) Management accounting
B) Financial accounting
C) Internal accounting
D) Cost accounting
Answer: B
Q2) In an accounting information system, which of the following is NOT a transformational process?
A) collecting data
B) analyzing data
C) performance reporting
D) summarizing data
Answer: C
Q3) Which of the following activities is NOT associated with the financial accounting information system?
A) reporting on the cost of quality
B) reporting to the SEC
C) preparing reports for the IRS
D) preparing a statement of cash flows
Answer: A
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Chapter 2: Basic Cost Management Concepts
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Q1) Which of the following is a trait of a functional-based cost management system?
A) unit-based drivers
B) tracing intensive
C) use of both financial and nonfinancial measures of performance
D) detailed activity information
Answer: A
Q2) Which of the following is NOT one of the features of an operational control information system?
A) to assist in continuous improvement of all aspects of the business
B) to improve the value received by customers
C) to improve profits by improving value
D) to provide product cost information needed by management
Answer: D
Q3) The sum of the total additions to work in process during a period is
A) total manufacturing costs added.
B) factory overhead applied.
C) material used.
D) cost of goods manufactured.
Answer: A
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Chapter 3: Cost Behavior
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Sample Questions
Q1) In the method of least squares, the deviation is the difference between the A) predicted and estimated costs.
B) predicted and average costs.
C) average and actual costs.
D) predicted and actual costs.
Answer: D
Q2) _______________ are those that are acquired from outside sources, where the terms of acquisition do NOT require any long-term commitment for any given amount of the resource.
A) Flexible resources
B) Committed resources
C) Discretionary fixed expenses
D) Committed fixed expenses
Answer: A
Q3) Salaries paid to shift supervisors are an example of a
A) step-variable cost.
B) step-fixed cost.
C) variable cost.
D) mixed cost.
Answer: B
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Chapter 4: Activity-Based Costing
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Sample Questions
Q1) Refer to Figure 4-10.What is the consumption ratio for the plantwide activity rate?
A) .25; .75
B) .71; .29
C) .2; .8
D) .8; .2
Q2) Refer to Figure 4-14.If the number of inspections is used to assign inspection costs, the amount of inspection costs allocated to the proposed job would be
A) $2,700.
B) $ 990.
C) $ 900.
D) $ 540.
Q3) A(n) _______________ system first traces costs to activities and then to products.
A) direct costing
B) absorption costing
C) functional-based costing
D) activity-based costing
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Chapter 5: Product and Service Costing: Job-Order System
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Sample Questions
Q1) Under normal costing, which of the following statements is true regarding factory overhead?
A) The balance in factory overhead at the end of the accounting period is closed.
B) Different overhead rates are used for different quantities of predicted activity.
C) The balance in factory overhead at the end of the accounting period is kept open.
D) The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of goods sold and inventory accounts.
Q2) Why are unit costs important? Why do full-cost unit costs change from accounting period to accounting period.
Q3) Why are firms reluctant to use actual costing? How does normal costing solve the problems?
Q4) Manufacturers producing unique or customized products would employ a(n) A) process costing system.
B) job-costing system.
C) homogeneous costing system.
D) all of these.
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Chapter 6: Process Costing
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Sample Questions
Q1) Refer to Figure 6-4.What are the conversion costs in the Finishing Department?
A) $35,000
B) $40,000
C) $37,500
D) $57,500
Q2) Refer to Figure 6-12.What are the FIFO cost per unit for materials?
A) $1.00
B) $0.77
C) $0.75
D) $0.65
E) none of these
Q3) Refer to Figure 6-20.What is CUPORAMA's total cost for Casts in April?
A) $13,750
B) $26,275
C) $28,750
D) $70,000
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Chapter 7: Allocating Costs of Support Departments and Joint Products
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Sample Questions
Q1) Which of the following would be the most appropriate base for allocating the costs of the maintenance department?
A) machine hours
B) direct labor hours
C) number of employees
D) square feet
Q2) The sales-value-at-split-off method allocates joint production costs based on each product's share of
A) sales value revenues have not been realized at the split-off point.
B) costs realized at the split-off point.
C) final sales value less further processing costs after the split-off point.
D) units produced at the split-off point.
Q3) What is the gross profit of No.3 common if the constant gross margin percentage method is used?
A) $45,900
B) $168,750
C) $81,600
D) $135,000
Q4) Compare and contrast the various methods of accounting for joint product costs.
Page 9
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Chapter 8: Budgeting for Planning and Control
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Sample Questions
Q1) After preparing a finished goods inventory budget for August, what is the total ending inventory cost?
A) $26,100 units.
B) $31,755 units.
C) $69,600 units.
D) $36,540 units.
Q2) Refer to Figure 8-8.The static budget for total variable costs is
A)$90 U.
B)$180 U.
C)$790 F.
D)$880 F.
Q3) Which of the following statement is correct regarding a continuous budget?
A) The budget is prepared for a one-year period that corresponds to the company's fiscal year.
B) A continuous budget is a monthly budget.
C) As a month/period expires in the budget, an additional month/period in the future is added so the company always has a 12-month budget on hand.
D) None of these
Q4) Discuss the features of an ideal budgetary process.
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Chapter 9: Standard Costing: a Functional-Based Control Approach
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Sample Questions
Q1) How many actual labor hours were worked during February for Claire Company?
A) 10,000
B) 2,000
C) 1,200
D) 12,000
Q2) Using more highly skilled direct laborers might affect which of the following variances?
A) direct materials usage variance
B) direct labor efficiency variance
C) variable manufacturing overhead efficiency variance
D) all of these
Q3) A materials price variance would NOT be caused by
A) ordering the wrong quality of materials.
B) ordering from the wrong supplier.
C) not taking a quantity discount.
D) requiring laborers to work overtime.
Q4) Compare and contrast mix and yield variances.
Q5) How are standards developed? What is the difference between ideal and currently attainable standards?
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Chapter 10: Decentralization: Responsibility Accounting, Performance
Evaluation, and Transfer Pricing
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Sample Questions
Q1) Negotiated prices are transfer prices
A) determined between a division and corporate headquarters.
B) negotiated with external customers.
C) used when supplying and buying divisions independently agree on a price.
D) agreed to by division management and employees.
Q2) The "floor" in transfer pricing is
A) the transfer price that would leave the buying division no worse off if an input is purchased from an internal division.
B) the transfer price that would leave the selling division no worse off if the good is sold to an internal division.
C) the transfer price that would leave the buying division worse off if an input is purchased from an internal division.
D) none of these.
Q3) The company uses the opportunity cost approach to transfer pricing.Which case should not be transferred internally?
A) Case 1
B) Case 2
C) Neither should be transferred internally.
D) Both should be transferred internally.
Page 12
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Chapter 11: Strategic Cost Management
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Sample Questions
Q1) Which of the following manufacturing costs is assigned to products in a traditional and JIT environment using allocation?
A) insurance and taxes
B) direct labor
C) supervision (department)
D) custodial services
Q2) The operational activity of assembling parts is an example of a
A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.
Q3) In activity-based costing, supplier costs
A) must be narrower, including only the purchase price.
B) are allocated to products arbitrarily.
C) include costs of quality, reliability and timeliness and are assigned to products on a causal basis.
D) all of these statements are true.
Q4) Explain the difference between acceptable quality level and total quality control.
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Chapter 12: Activity-Based Management
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Q1) Which of the following process dimensions of the activity-based management model deals with "why"?
A) resources
B) driver analysis
C) activities
D) performance measures
Q2) The value-added costs are
A) $80,000.
B) $40,000.
C) $20,000.
D) $-0-.
Q3) The value-added costs are
A) $4.
B) $8.
C) $64.
D) $72.
Q4) What is responsibility accounting? Compare and contrast financial-based responsibility accounting with activity-based responsibility accounting.
Q5) What is process value analysis?
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Chapter 13: The Balanced Scorecard: Strategic-Based Control
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Sample Questions
Q1) Strategic-based performance measures are balanced measures.Give examples of four types of balanced measures.
Q2) Cycle time is
A) the time it takes to collect the account after the sale.
B) the time it takes to turn inventory over.
C) the time it takes to deliver the product after it is sold.
D) the time it takes to produce one unit of product.
Q3) Which of the following might be a measure of employee motivation, empowerment, and alignment?
A) process efficiency
B) suggestions per employee
C) customer satisfaction
D) units product cost
Q4) Which of the following is NOT a major enabling factor of the learning and growth perspective?
A) customer attributes
B) information system capabilities
C) employee attitudes
D) employee capabilities
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Q5) Compare and contrast activity-based measures and strategic-based measures.
Chapter 14: Quality and Environmental Cost Management
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Q1) For the current year, internal failure costs are what percentage of operating costs?
A) 4.00%
B) 2.90%
C) 2.50%
D) 1.50%
Q2) An example of additional revenue that might result from environmental activities is A) revenue from recycling.
B) finding new applications for waste.
C) increased sales as a result of improved environmental image.
D) all of these.
Q3) If quality costs were reduced to 2.5 percent of sales, profits would increase by
A) $1,000,000.
B) $850,000.
C) $500,000.
D) $250,000.
Q4) Within the robust view of strategy, describe the management strategy to reduce quality costs recommended by the American Society for Quality Control.
Q5) What does quality mean and how has improving quality increased firm value?
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Chapter 15: Lean Accounting and Productivity Measurement
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Sample Questions
Q1) Total productive efficiency is the point at which _______________ and _______________ are achieved.
A) cost efficiency; profit efficiency
B) technical efficiency; allocative efficiency
C) sales efficiency; profit efficiency
D) maintenance efficiency; profit efficiency
Q2) The processing department can produce one unit every 5 minutes and is the last department before the finishing department.Under traditional manufacturing where a batch equals 10 units, how long will it be before the first unit in the batch can move from the processing department to the finishing department?
A) 5 minutes
B) 50 minutes
C) 10 minutes
D) not enough information is given
Q3) Describe the objectives and characteristics of a Lean Manufacturing system.
Q4) Discuss the advantages and disadvantages of partial productivity measures.
Q5) Explain the difference between technical and input trade-off efficiency.
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Q6) Define what constitutes total productive efficiency, including a definition of technical efficiency and allocative efficiency.
Chapter 16: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The contribution margin at the break-even point
A) equals total fixed costs.
B) is zero.
C) plus total fixed costs equals total revenues.
D) is greater than variable costs.
Q2) Baker Company sells its product for $60.In addition, it has a variable cost ratio of 40 percent and total fixed costs of $9,000.What is the break-even point in sales dollars for Baker Company?
A) $3,600
B) $5,400
C) $15,000
D) $9,000
Q3) The Richard Company has an operating leverage of 2.Sales for 2011 are $100,000 with a contribution margin of $50,000.Sales are expected to be $150,000 in 2012.Operating income for 2012 can be expected to increase by what amount over 2011?
A) $25,000
B) 200%
C) $50,000
D) 40%
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Chapter 17: Activity Resource Usage Model and Tactical Decision Making
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Q1) What are relevant costs? How do they relate to decision making?
Q2) Assume that the selling price of product F is increased to $8.25 with a reduction in monthly sales to 400 units.Monthly profits will
A) increase by $2,070.
B) increase by $420.
C) increase by $180.
D) decrease by $60.
Q3) Assuming all of the sell now or process further decisions were correctly made, what will be the firm's income?
A) $736,000
B) $654,000
C) $596,000
D) $610,000
Q4) A purchasing agent has two potential firms from which to buy materials for production.If both firms charge the same price, the material cost is a(n)
A) irrelevant cost.
B) relevant cost.
C) sunk cost.
D) opportunity cost.
19
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Chapter 18: Pricing and Profitability Analysis
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Sample Questions
Q1) Which option is preferred?
A) Option One
B) Option Two
C) Option Three
D) Options One and Three are equally preferred.
Q2) What is the primary difference between variable and absorption costing?
A) inclusion of fixed selling expenses in product costs
B) inclusion of variable factory overhead in period costs
C) inclusion of fixed selling expenses in period costs
D) inclusion of fixed factory overhead in product costs
Q3) What would be the price for a product that has a cost of $500, assuming that the markup is based on cost of goods sold?
A) $834
B) $625
C) $708
D) $2,000
Q4) Compare and contrast the various pricing policies used by companies.
Q5) What are some of the pricing practices regulated by law?
Q6) Discuss the limitation of profit measurement.
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Chapter 19: Capital Investment
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Sample Questions
Q1) The accounting rate of return on original investment is calculated as A) original investment/net income.
B) net income/debt.
C) average income/original investment.
D) assets/debt.
Q2) Julius Company is considering the purchase of a new machine for $100,000.The machine generates annual revenues of $62,500 and annual expenses of $37,500, which includes $7,500 of depreciation.What is the payback period in years on the machine approximated to one decimal point?
A) 1.6
B) 3.1
C) 4.0
D) 1.7
Q3) A firm is evaluating a project that has a net present value of $0 when a discount rate of 8 percent is used.A discount rate of 6 percent will result in a
A) negative net present value.
B) positive net present value.
C) net present value of $0.
D) the question cannot be answered based upon the information provided.
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Chapter 20: Inventory Management: Economic Order
Quantity, Jit, and the Theory of Constraints
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Sample Questions
Q1) The shadow price
A) indicates the amount by which throughput will increase for one unit of unconstrained resource.
B) is the price paid on the black market for one unit of scarce resource.
C) is the price paid at night for a scarce resource.
D) indicates the amount by which contribution margin will increase for one unit of scarce resource.
Q2) One of the traditional reasons for holding inventory is to avoid shutdowns due to defective parts.The JIT solution is to
A) reduce setup costs.
B) reduce lead time.
C) use total preventive maintenance.
D) use total quality control.
Q3) Which of the following equations determines the total annual ordering costs?
A) Cost of placing an order times the order quantity.
B) Cost of placing an order times the number of orders per year.
C) Cost of placing an order times one-half of the order quantity.
D) Unit carrying costs per year times the order quantity.
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