Course Introduction
Financial Management
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Financial Management introduces students to the fundamental principles and practices used in the financial operations of organizations. The course covers key topics such as financial statement analysis, budgeting, capital structure, risk management, and investment decision-making. Students learn how to evaluate financial performance, make informed financing and investment choices, and apply modern financial tools to maximize value. Throughout the course, real-world case studies and practical examples are used to develop analytical skills and a comprehensive understanding of the role of finance in achieving organizational objectives.
Recommended Textbook Management Accounting for Business 6th Edition by Colin Drury
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Page 2
Chapter 1: Introduction to Management Accounting
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Q1) Which one of the following statements about ethical behaviour is true?
A) Ethical behaviour is not guided by well-defined rules and is often subjective.
B) Ethical behaviour is best described as doing actions that are permitted by law.
C) Ethical behaviour always involves choosing between actions that are clearly right or wrong.
D) Ethical behaviour is best guided by a policy of placing corporate performance above individual ends.
Answer: A
Q2) The formulation of a scheme or program for the accomplishment of a specific purpose or goal is referred to as
A) controlling.
B) motivating.
C) organizing.
D) planning.
Answer: D
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Chapter 2: An Introduction to Cost Terms and Concepts
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Q1) An equipment lease that specifies a payment of £5,000 per month plus £8 per machine hour used is an example of a
A) fixed cost.
B) variable cost.
C) step cost.
D) mixed cost.
Answer: D
Q2) _____ are expensed in the period in which they are incurred.
A) Direct materials
B) Product costs
C) Factory overhead
D) Nonproduction costs
Answer: D
Q3) Mixed costs contain both
A) product and period costs.
B) fixed and variable costs.
C) direct and indirect costs.
D) controllable and noncontrollable costs.
Answer: B
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Chapter 3: Cost-Volume-Profit Analysis
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Q1) In a cost-volume-profit graph, the slope of the total cost line represents A) the selling price per unit.
B) the contribution margin per unit.
C) the variable cost per unit.
D) total contribution margin.
Answer: C
Q2) Patricia Company produces two products, X and Y, which account for 60 percent and 40 percent, respectively, of total monetary sales. Contribution margin ratios are 50 percent for X and 25 percent for Y. Total fixed costs are £120,000. What is Patricia's break-even point in monetary sales?
A) £300,000
B) £328,767
C) £342,856
D) £375,000
Answer: A
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Chapter 4: Measuring Relevant Costs and Revenues for Decision-Making
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Sample Questions
Q1) Relevant costs are
A) past costs.
B) future costs.
C) full costs.
D) cost drivers.
Q2) Which of the following is a qualitative factor that should be considered when evaluating a make-or-buy decision?
A) the quality of the outside supplier's product
B) whether the outside supplier can provide the needed quantities
C) whether the outside supplier can provide the product WHEN it is needed
D) all of the above
Q3) Which of the following costs is NOT relevant to a make-or-buy decision?
A) £10,000 of direct labour used to manufacture the parts
B) £30,000 of depreciation on the plant used to manufacture the parts
C) the supervisor's salary of £25,000 that will be avoided if the part is purchased from an outside supplier
D) £15,000 in rent from leasing the production space to another company if the part is purchased from an outside supplier
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Chapter 5: Pricing Decisions and Profitability Analysis
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Sample Questions
Q1) Refer to Multiple Products Co. What is the markup on variable costs needed to break even?
A) 100 percent
B) 40 percent
C) 140 percent
D) 180 percent
Q2) Which of the following statements describes a legitimate disadvantage of cost-based pricing?
A) Marginal costs and revenues are difficult to measure.
B) Determining the amount a customer is willing to pay may require sufficient estimation.
C) Customers may not be willing to pay the price determined by the procedure.
D) all of the above
Q3) Many products have a predictable profit or product life cycle. Describe the product life cycle from the marketing perspective. In addition, graph profit versus the different phases. Finally, discuss the impact of the product life cycle on products, learning effects, setups, purchasing, and marketing expenses.
Q4) Provide a short critique of cost-based pricing. What are the four major drawbacks to this pricing approach?
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Chapter 6: Capital Investment Decisions
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Sample Questions
Q1) Refer to Figure 5. The present value of the salvage value is
A) £15,673
B) £17,550
C) £18,225
D) £23,220
Q2) A firm is considering a project with annual cash flows of £40,000. The project would have a 10-year life, and the company uses a discount rate of 8 percent. What is the maximum amount the company could invest in the project and the project still be acceptable?
A) £400,000
B) £268,400
C) £203,200
D) £363,600
Q3) Refer to Figure 6. Based on quantitative factors, should JD accept, reject, or wait on the project?
A) accept
B) reject
C) wait
Q4) What types of non-quantitative factors can influence the final decision concerning approval of capital expenditures?
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Chapter 7: Cost Assignment
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Q1) Discuss how managerial product costing differs from product costing for financial reporting.
Q2) For a labour-intensive manufacturing operation, which of the following would be the most appropriate cost driver?
A) machine hours
B) direct labour hours
C) number of employees
D) units of output
Q3) Examples of producing departments include all of the following EXCEPT
A) mixing.
B) molding.
C) packaging.
D) accounting.
Q4) A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?
A) units of direct material used
B) direct labour hours
C) direct labour cost
D) machine hours
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Chapter 8: Activity-Based Costing
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Sample Questions
Q1) When selecting an activity driver, a company should consider A) the cost of measurement.
B) the time of the year.
C) the cause and effect between the activity driver and the cost pool.
D) both a and C
Q2) What is cross-subsidization and when is it most likely to occur?
Q3) More accurate product costing information is produced by assigning costs using A) a volume-based, plantwide rate.
B) volume-based, departmental rates.
C) activity-based pool rates.
D) all of the above.
Q4) The most critical step in activity-based costing is identifying cost drivers. Explain this statement.
Q5) Refer to Figure 5. If Peach, SA., used activity-based cost drivers to allocate overhead costs, the unit cost for Job 401 would be (round to two decimal places)
A) £42.81
B) £53.13
C) £53.91
D) £54.06
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Chapter 9: The Budgeting Process
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Q1) Which of the following is an example of a discretionary fixed expense?
A) direct labour
B) depreciation on a factory building
C) insurance on a building
D) property taxes on a factory building
Q2) Discuss the role of budgeting in planning, control, and decision making.
Q3) Gerald Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. Based on this information, the number of units of A1 that needs to be purchased by Gerald during the first month is
A) 9,500 units.
B) 10,000 units.
C) 1,000 units.
D) 10,500 units.
Q4) Discuss the features of an ideal budgetary process.
Q5) In what ways does a department orientation hinder traditional budgeting?
Q6) Describe an activity-based budget.
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Chapter 10: Management Control Systems
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Q1) When budgets are used for control,
A) budgeted amounts from different years are compared.
B) actual amounts from different years are compared.
C) budgeted amounts are compared to actual amounts.
D) None of these is correct.
Q2) When top management assumes total control of the budgeting process and seeks only superficial participation from lower-level managers, this practice is called
A) pseudoparticipation
B) false participation
C) participative budgeting
D) none of the above
Q3) Which of the following departments would NOT be classified as a profit centre?
A) the accounting department of a large PLc
B) the automotive division of a large PLc
C) the hardware department of a department store
D) the men's shoe department of a department store
Q4) Before implementing a responsibility accounting system, all areas of authority and responsibility within an organization must be clearly defined. Explain how this accomplished and why it is important.
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Chapter 11: Standard Costing and Variance Analysis
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Q1) The purchase of inferior direct materials at a lower price might affect which of the following variances?
A) materials price variance
B) materials usage variance
C) labour efficiency variance
D) all of the above
Q2) Refer to Figure 5. Ebola's variable overhead spending (expenditure)variance would be
A) £36,000 favorable
B) £36,000 unfavorable
C) £40,000 favorable
D) £40,000 unfavorable
Q3) An unfavorable materials price variance with a favorable materials usage variance would most likely be the result of
A) machines breaking down
B) problems with labour efficiency
C) purchase of high quality materials
D) problems with labour rates
Q4) Discuss the advantages and disadvantages of both ideal or currently attainable standards.
Page 13
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Chapter 12: Divisional Financial Performance Measurement
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Sample Questions
Q1) Refer to Figure 3 above. If you were the president of the firm, which projects would you want the division manager to accept?
A) Projects A, B, and C
B) Projects B and C
C) Project A only
D) Project B only
Q2) Return on investment (ROI) is calculated as
A) Divisional operating income/Divisional investment
B) Divisional investment - Division income
C) Divisional investment/Divisional operating income
D) Divisional income - (Divisional investment x Required rate of return)
Q3) Refer to Figure 2. Dartmouth, SA.'s turnover for the current year is
A) 5.6
B) 13.9
C) 4
D) 2.5
Q4) Discuss the differences between centralized and decentralized decision making. Why would a firm decentralize its operations?
Q5) Why do firms decentralize?
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Chapter 13: Transfer Pricing in Divisionalized Companies
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Q1) Refer to Figure 2 above. Assume the Fahl Division can sell 800 units at £120 each. Any excess capacity will be unused unless the units are purchased by the Melton Division, which could use up to 100 units. The maximum transfer price that the Melton Division would be willing to pay would be
A) £120
B) £110
C) £100
D) £60
Q2) Which of the following is a legitimate disadvantage of negotiated transfer pricing?
A) Negotiated based transfer pricing fails to provide adequate autonomy to divisional managers.
B) Negotiated based transfer prices will always be higher than market price.
C) Negotiated based transfer prices usually fail to allow the seller to cover variable costs.
D) Negotiated prices may lead to some less than optimal decisions.
Q3) Discuss the advantages of decentralization in a multinational company.
Q4) Explain why it is important for the multinational company to separate the evaluation of the manager of the division from the evaluation of the division.
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Chapter 14: Cost Management
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Sample Questions
Q1) Downtime attributed to quality problems is a(n)
A) external failure cost.
B) internal failure cost.
C) appraisal cost.
D) prevention cost.
Q2) Costs incurred because products or services fail to meet requirements after delivery to customers are called
A) external failure costs
B) internal failure costs
C) appraisal costs
D) prevention costs
Q3) Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs £4 per pound. The value-added costs are
A) £4.
B) £8.
C) £64.
D) £72.
Q4) Compare and contrast functional-based, activity-based, and strategic-based responsibility accounting.
Page 16
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Chapter 15: Strategic Performance Management
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Questions
Q1) _____ involves choosing among alternative strategies with the goal of selecting a strategy, or strategies, that provides a company with reasonable assurance of long-term growth and survival.
A) Strategic decision making
B) Strategic cost management
C) Competitive advantage
D) Customer value
Q2) When a computer company selects a mix of strategies in order to create sustainable competitive advantage, it is following a
A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.
Q3) Which of the following is not a step in developing the Balanced Scorecard?
A) setting balanced objectives
B) outlining control procedures
C) setting target values
D) rewards
Q4) Describe the basic features of the Balanced Scorecard.
Q5) List three benefits of a value chain perspective.
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