Financial Management
Test Preparation
Course Introduction
Financial Management is a foundational course focusing on the principles, tools, and techniques necessary for effective financial decision-making within organizations. The course covers essential topics such as financial statement analysis, time value of money, capital budgeting, cost of capital, working capital management, and risk analysis. Students learn how to evaluate investment opportunities, forecast financial needs, and develop strategies to maximize shareholder value while managing financial risks. Emphasis is placed on practical applications and the use of quantitative methods to solve real-world financial problems, preparing students for roles in corporate finance, investment analysis, and financial planning.
Recommended Textbook
Cost Management A Strategic Emphasis 7th Edition by Edward Blocher
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Chapter
CVP Analysis
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79 Flashcards
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Sample Questions
Q1) Which of the following is not a consequence of lack of strategic information?
A)Inability to effectively benchmark competitors.
B)Failure to identify most profitable products.
C)Inability to trace costs to individual products.
D)Incorrect investment decisions.
Answer: C
Q2) Required: Identify two of the most successful companies or organizations in today's business environment, in your opinion. Explain why they are so successful. Answer: There are a number of possible answers, including: Walmart: low cost
3M, Hewlett Packard: innovation
Johnson & Johnson: reputation, product excellence, reliability Amazon.com, Nordstrom Stores: customer service
Walt Disney: attention to detail, customer satisfaction
UPS, Dell: speed of service
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Page 3
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Sample Questions
Q1) Which of the following best describes the type of information that cost management must provide that is important for the success of the organization?
A)Short term information for decision making.
B)Reported financial information.
C)Reported nonfinancial information.
D)Information that addresses the strategic objectives of the organization.
E)Long-term planning information.
Answer: D
Q2) The financial critical success factor of profitability can be measured by:
A)Community service activities.
B)Customer returns and complaints.
C)Number of product defects.
D)Number of design changes.
E)Earnings from operations.
Answer: E
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Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) Theoretically, a decision maker would probably be willing to buy cost management information if:
A)It is accurate.
B)It is consistent with management objectives.
C)It is timely.
D)Its value is equal to or greater than its cost.
Answer: D
Q2) What should be the amount in the finished goods inventory at December 31, 2013?
A)$55,500.
B)$35,000.
C)$43,000.
D)$49,000.
Answer: D
Q3) A group of related products may be referenced as:
A)Cost objects
B)Cost drivers
C)Value streams
D)Cost pools
Answer: C
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Page 5
Chapter 4: Job Costing
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Sample Questions
Q1) Which of the following is not a method the management accountant must address regarding the costing system?
A)Cost accumulation method.
B)Cost measurement method.
C)Labor decision method.
D)Overhead assignment method.
Q2) Assuming Jackson Inc. applied overhead based on direct labor hours, the firm's predetermined overhead rate for 2013 is:
A)$14.20 per direct labor hour.
B)$14.38 per direct labor hour.
C)$15.24 per direct labor hour.
D)$15.50 per direct labor hour.
E)$15.85 per direct labor hour.
Q3) The debit to Work-in-Process Inventory account for materials is:
A)$110,000.
B)$30,000.
C)$90,000.
D)$80,000.
E)$50.000.
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Page 6
Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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149 Flashcards
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Sample Questions
Q1) In an activity-based costing system, overhead costs are divided into separate:
A)Cost objects.
B)Activity cost pools.
C)Resource consumption and activity consumption cost drivers.
D)Product-line cost pools.
E)Plantwide or departmental cost pools.
Q2) Using ABC, how much machine setup overhead is assigned to the order?
A)$19,200.
B)$8,000.
C)$11,108.
D)$9,960.
E)$7,272.
Q3) A measure of the quantity of resources consumed by an activity is:
A)Quantity driver.
B)Resource consumption cost driver.
C)Not a cost driver.
D)Activity consumption cost driver.
E)Consumption cost driver.
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Chapter 6: Process Costing
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Sample Questions
Q1) The number of the same or similar units that could have been produced given the amount of work actually performed on both complete and partially complete units is referred to as:
A)Physical units.
B)Completed units.
C)Equivalent units.
D)Produced units.
E)Units to account for.
Q2) Backflush costing:
A)Is a simplified approach to determining product cost that is used when there is little or no work-in-process inventory.
B)Involves the use of standard costing.
C)Allows product costs to be quickly and conveniently calculated
D)Is an approach to determining product cost that is used when JIT is used.
E)ALL of the above.
Q3) Conversion costs in a process cost system include:
A)Direct materials and direct labor.
B)Direct labor and manufacturing overhead.
C)Direct materials and manufacturing overhead.
D)Manufacturing overhead and selling, general & administrative expenses.
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Chapter 7: Cost Allocation: Departments, Joint Products, and
By-Products
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96 Flashcards
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Sample Questions
Q1) The amount of joint costs allocated to product Z using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):
A)$14,333.
B)$15,158.
C)$18,624.
D)$17,667.
E)$32,454.
Q2) The total cost accumulated in the sales department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):
A)$100,000.
B)$109,000.
C)$126,000.
D)$130,000.
E)$135,000.
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9
Chapter 8: Cost Estimation
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Sample Questions
Q1) If the coefficient of correlation between two variables is nearly zero, how might a graph of these variables appear?
A)Random points.
B)A least squares line that slopes up to the right.
C)A least squares line that slopes down to the right.
D)Under this condition, a scatter diagram could not be plotted on a graph.
Q2) Based on the data derived from the regression analysis, 420 maintenance hours in a month mean that maintenance costs should be budgeted to the nearest dollar at
A)$3,780
B)$3,461
C)$3,797
D)$3,746
E)None of the above
Q3) The statistic that indicates precision of the regression is: A).9982.
B)47.0630.
C)0.9981.
D)Lower 95% and Upper 95%.
E)Significance F (1.44E-13).
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Chapter
Cvp Analysis
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Sample Questions
Q1) What is Staley Co.'s margin of safety (MOS), in units, if 600 units are sold and all costs and revenues are as budgeted? (Round intermediate calculation up to nearest whole number of units.)
A)123.
B)242.
C)128.
D)141.
E)214.1. Break-even point, in units = Fixed costs ÷ contribution margin per unit = $80,000 (given) ÷ $168/unit (given) = 477 units (rounded up)
Q2) Which of the following items is NOT useful for addressing risk and uncertainty in CVP analysis?
A)Regression analysis
B)Sensitivity analysis
C)What-if analysis
D)Monte Carlo Simulation (MCS) analysis
E)Decision trees and decision tables
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11
Chapter 10: Strategy and the Master Budget
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Sample Questions
Q1) Blake Company has $15,000 cash at the beginning of June and anticipates $50,000 in cash receipts and $34,500 in cash disbursements. The company requires a minimum cash balance of $20,000. Any excess cash over the minimum desired balance is used to pay down debts. Blake has an agreement with its bank to borrow as needed or to repay loans as funds become available. As of May 31, the company owes $15,000 to the bank. The balance of the loan on June 30 will be:
A)$4,500.
B)$9,500.
C)$15,000.
D)$19,500.
E)$25,500.
Q2) How many units of Zbox are to be manufactured by Adel Co. during September?
A)150,000.
B)189,000.
C)200,000.
D)201,000.
E)202,000.
Q3) What is zero-base budgeting (ZBB) and how does this approach to budgeting compare to what can be considered "traditional budgeting"? How is ZBB implemented in practice?
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Chapter 11: Decision Making With a Strategic Emphasis
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Sample Questions
Q1) Which one of the following issues would least likely be addressed during the regular review of product profitability?
A)Which product managers should be rewarded?
B)Which products are most profitable?
C)Which products provide the greatest contribution margin per unit of the scarce resource?
D)Which products should be promoted and advertised most aggressively?
E)Are the products priced properly?
Q2) One of the key management functions is to perform a regular review of product profitability. Which question(s) below would not be asked when performing the analysis?
A)Are the products priced properly?
B)Which products are the most profitable?
C)Which products should be advertised more aggressively?
D)Should any product manager be rewarded?
E)What was the product manager paid last year?
Q3) What strategic factors/considerations are generally relevant to the special order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)?
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Chapter 12: Strategy and the Analysis of Capital Investments
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Sample Questions
Q1) The hurdle rate for accepting new capital investment projects is 4%, after-tax. (Note: To answer this question, students will have to be provided with the Tables provided in Appendix C, Chapter 12. Alternatively, the instructor can provide students with the following PV $1 factors for 4%: for 1 year = 0.962, for year 2 = 0.925, for year 3 = 0.889, for year 4 = 0.855, for year 5 = 0.822; the PV annuity factor for 4%, 5 years = 4.452.) The estimated internal rate of return (IRR) on this investment is:
A)Less than 4%.
B)4%.
C)Slightly above 4%.
D)Greater than 6%.
E)Undeterminable with only the given information.
Q2) The annual tax depreciation expense on an asset reduces income taxes by an amount equal to
A)The firm's average tax rate times the depreciation amount.
B)One minus the firm's average tax rate times the depreciation amount.
C)The firm's marginal tax rate times the depreciation amount.
D)One minus the firm's marginal tax rate times the depreciation amount.
E)The depreciation amount.
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Chapter 13: Cost Planning for the Product Life Cycle: Target
Costing, Theory of Constraints, and Strategic Pricing
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Sample Questions
Q1) If Johnson determines price using a 20% markup of life cycle cost, the price is:
A)$262.50
B)$306.00
C)$375.00
D)$364.29
E)$330.00
Q2) What price will the company charge if the firm uses cost-plus pricing based on variable manufacturing cost and a markup percentage of 200%?
A)$810.
B)$450.
C)$540.
D)$675.
E)Some other amount.
Q3) Profit before taxes for the Askin product, per life-cycle income statements, is:
A)$175,000.
B)$425,000.
C)$522,500.
D)$207,500.
E)$332,500.
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Chapter 14: Operational Performance Measurement:
Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Sample Questions
Q1) The amount D is:
A)$12,000.
B)$15,000.
C)$16,500.
D)$18,000.
E)$33,000.
Q2) One important short-term financial goal for a company is to earn the projected operating income for the period. Attainment of this goal is measured by comparing the actual operating income for the period to the:
A)Flexible-budget operating income for the period.
B)Prior period's operating income.
C)Income reflected in the company's balanced scorecard.
D)Master budget operating income.
E)Industry average operating income.
Q3) What was the direct materials price variance for July?
A)$1,500 favorable.
B)$3,000 unfavorable.
C)$3,000 favorable.
D)$7,500 unfavorable.
E)$7,500 favorable.
Page 16
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource-Capacity Management
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Sample Questions
Q1) As was the case with the material presented in text Chapter 14, the cost variances covered in Chapter 15 are directed at what might be called short-term financial control. These variances are calculated on the basis of standard costs and the use of flexible budgets. Periodic reports containing these variances are but a part of a larger and more comprehensive management accounting and control system.
Required: Explain some of the inherent limitations of short-term financial performance measures (such as standard cost variances) and how such measures might be supplemented to better meet the planning and control needs of management.
Q2) If Zero Company uses a two-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead flexible-budget variance for December?
A)N/A-this variance doesn't exist under a two-way breakdown of the total overhead variance.
B)$225 favorable.
C)$425 unfavorable.
D)$650 unfavorable.
E)$690 unfavorable.
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Sample Questions
Q1) A partial operational productivity measure:
A)Uses physical units in both the numerator and denominator.
B)Is harder to understand than a partial financial productivity measure.
C)Is affected by price changes and other factors.
D)Is a comprehensive productivity measure.
E)Has the advantage of considering the effects of both speed and quantity of a resources input on productivity.
Q2) In 2012, the partial financial productivity of Material A is:
A)0.28.
B)0.33.
C)3.00.
D)3.33.
E)3.60.
Q3) When the mix of products sold shifts toward the high contribution margin product, the total:
A)Sales mix variance is favorable.
B)Sales volume variance is favorable.
C)Market mix variance is favorable.
D)Sales mix variance is unfavorable.
E)Sales price variance is favorable.
Page 19
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Chapter 17: The Management and Control of Quality
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Sample Questions
Q1) The four accepted categories of a Cost of Quality (COQ) Report are prevention, appraisal, internal failure, and external failure. Assume your cost management instructor has given you an assignment related to COQ. You are to relate each of the cost categories above to the preparation of a class project, which is a study of an actual firm's cost management system. The typical student spends 16 hours researching an identified firm, five hours writing the report, and three hours in revising and presenting the report to the class.
Required:
1. Give an example of prevention, appraisal, internal failure, and external failure costs you might encounter in writing and presenting your report. (Example: "Draw up a time budget with necessary deadlines before starting the report" is an example of a prevention cost.)
2. Which of the four category examples you gave for Requirement (1) above has the greatest cost? What has the least cost? What has the greatest benefit? What has the least benefit? (Example: "Not saving word processing on a hard drive or jump drive" is an example of greatest cost in terms of time.)
Q2) Exhibit 17.3 provides a diagrammatical representation of a comprehensive framework for managing and controlling quality. Discuss, briefly, five elements of this framework.
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Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Sample Questions
Q1) Profit center income statements are most meaningful to managers when they are prepared:
A)On a full cost basis.
B)On a cost behavior basis.
C)On a cash basis.
D)In a single-step format.
E)In a multiple-step format.
Q2) The need for coordination between the production and the selling function will impact the choice of:
A)Profit, cost or revenue center.
B)Manager for the firm.
C)Formal or informal control systems.
D)Profitability goal for the firm.
E)Control measures to prevent fraud.
Q3) Full costing operating income for 2013 is calculated to be:
A)$4,000,000.
B)$4,200,000.
C)$5,100,000.
D)$5,220,000.
E)$5,300,000.
Page 21
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Chapter 19: Strategic Performance Measurement:
Investment Centers and Transfer Pricing
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Sample Questions
Q1) Return on investment (ROI) is a term often used to express income earned on capital invested in a division (investment center). A division's ROI would increase if:
A)Sales increased by the same dollar amount as expenses and total assets increased.
B)Sales remained the same and expenses were reduced by the same dollar amount that total assets increased.
C)Sales decreased by the same dollar amount that expenses increased.
D)Sales and expenses increased by the same percentage that total assets increased.
E)Net profit margin on sales increased by the same percentage that total assets increased.
Q2) As a general rule, leased assets should be included as part of the calculation of "investment" (for calculating ROI and residual income) since they represent assets used:
A)As collateral to borrow funds.
B)To generate operating income.
C)To offset current operating expenses.
D)To reduce taxes.
E)To estimate earnings per share for a given period.
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Chapter 20: Management Compensation, Business
Analysis,
and Business Valuation
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Sample Questions
Q1) Firms typically provide benefits (perks) to employees to enhance motivation. Which of the following would not be an example of a perk?
A)Company car.
B)Country club membership.
C)Stock options.
D)Executive life insurance.
Q2) Jackson Supply Company has a 2 to 1 current ratio. This ratio would increase to more than 2 to 1 if the company:
A)Purchased a marketable security for cash.
B)Wrote off an uncollectible receivable.
C)Sold merchandise on account that earned a normal gross margin.
D)Purchased inventory on account.
Q3) There is a current tax deduction for the firm for which of the following types of compensation?
A)Qualified stock options.
B)Nonqualified stock options.
C)Deferred bonus.
D)Current bonus.
E)Performance shares.
23
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