Financial Planning and Analysis
Exam Solutions
Course Introduction
Financial Planning and Analysis is a course designed to equip students with the essential skills and knowledge required to evaluate the financial health of organizations and support strategic decision-making. The course covers key topics such as budgeting, forecasting, variance analysis, financial modeling, and performance measurement. Students learn to interpret financial data, develop comprehensive financial plans, and apply analytical techniques to assess risk and maximize value. Through real-world case studies and practical exercises, the course prepares students to provide actionable financial insights and recommendations that drive organizational success.
Recommended Textbook Management Accounting 2nd Edition by Leslie G. Eldenburg
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20 Chapters
1520 Verified Questions
1520 Flashcards
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Page 2
Chapter 1: The Role of Accounting Information in Management Decision Making
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Sample Questions
Q1) Accounting information cannot be used to motivate employee behavior. A)True
B)False Answer: False
Q2) Uncertainty and bias reduce decision quality. A)True
B)False
Answer: True
Q3) Which of these statements concerning the value chain is correct?
A) the value chain and the supply chain are different names for the same thing
B) the value chain essentially internalised an organisations' thinking
C) the value chain provides a sound foundation for exploring other initiatives such as activity based costing
D) all of the statements are correct
Essay/Matching
Answer: C
Q4) Incremental cash flows are relevant for decision making. A)True
B)False Answer: True
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Chapter 2: Cost Concepts, Behaviour and Estimation
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Sample Questions
Q1) Preparing a scatter plot is a requirement before applying the two-point method of cost estimation.
A)True
B)False
Answer: True
Q2) Reviewing the pattern of a cost over time is a critical step in determining an engineered cost estimate.
A)True
B)False
Answer: False
Q3) Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:
A) $1,185
B) $850
C) $475
D) $565
Answer: A
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Page 4
Chapter 3: A Costing Framework and Cost Allocation
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Sample Questions
Q1) As the number of cost pool increases the accuracy of the cost information decreases.
A)True
B)False
Answer: False
Q2) Which of these departments would not be considered a support department for a manufacturer of bathroom fittings?
A) accounts
B) security
C) computing departments
D) none of the above, i.e. all would be considered support departments for a manufacturer
Answer: D
Q3) Indirect costs are
A) costs that it is impossible to trace to a cost object
B) costs that cannot be traced to a cost object in an economic manner
C) the same as fixed costs
D) B and C
Answer: B
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Page 5
Chapter 4: Cost-Volume-Profit Cvp Analysis
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Sample Questions
Q1) Ryan Company manufactures a single product. The product sells for $10. The variable manufacturing cost per unit is $2 and the variable selling cost is $2 per unit. Ryan incurs monthly fixed costs of $100,000 for manufacturing and $140,000 for administration and selling. Ryan is considering changes to its production and distribution procedures. If the changes are made, total variable costs (manufacturing and selling) will be $3 and total fixed costs (manufacturing, administration, and selling) will be $350,000 per month. The selling price will remain at $10. If the changes are made, the number of units required to break even will be
A) Greater than before
B) The same as before
C) Less than before D) Cannot be determined
Q2) The margin of safety is the excess of a firm's profits above the breakeven point.
A)True
B)False
Q3) CVP calculations can only be used in companies that sell a single product. A)True
B)False
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Chapter 5: Job Costing Systems
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Sample Questions
Q1) Fixed and variable overhead costs are combined in one cost pool.
A)True
B)False
Q2) Under a job costing system the work-in-process ledger account is what type of account?
A) asset
B) liability
C) revenue
D) expense
Q3) A cost driver is a synonym for an allocation base.
A)True
B)False
Q4) The job cost record does not include non-traceable costs assigned to a particular job.
A)True
B)False
Q5) Inspection for spoilage should always be carried out at the end of the production process and not at an earlier period.
A)True
B)False
Page 7
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Chapter 6: Process Costing Systems
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Sample Questions
Q1) Which type of company would most likely use a process costing system?
A) Chemical producer
B) Custom furniture maker
C) Printer
D) Ship builder
Q2) Xeno Ltd operates a process costing system and uses the FIFO method. Beginning work in process consists of 1,000 units, 30% complete. Ending work in process is 15% complete, and direct materials are added at the 20% point. The equivalent units of production for materials are 14,000 and for conversion costs are 18,000. The number of units in ending work in process was
A) 37,000
B) 14,000
C) 18,000
D) 22,000
Q3) Conversion costs may be separated into direct labor and overhead when it is relatively easy to track direct labor and the use of labor occurs in a different pattern than the use of overhead resources.
A)True
B)False
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Page 8
Chapter 7: Absorption, Variable and Throughput Costing
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Sample Questions
Q1) Throughput costing is a modified form of absorption costing that treats direct labor and variable overhead as period expenses.
A)True
B)False
Q2) Absorption costing will produce a larger operating profit than variable costing if
A) Fixed production overhead increases
B) Fixed production overhead decreases
C) Units produced exceed units sold
D) Units sold exceed units produced
Q3) Taylor Ltd just finished its second year of operations. In the first year it produced 1,000 units and sold 400. The second year resulted in the same production level, but sales were 1,200 units. The variable costing income statements for both years are shown below: The operating profit for year 1 using absorption costing would be
A) $6,000
B) $(9,000)
C) $(9,800)
D) $600
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Chapter 8: Activity Analysis: Costing and Management
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Sample Questions
Q1) BVH manufactures and sells mobile phones. Which of the following activities is least likely to be considered a value-added activity for BVH?
A) Repairing phones
B) Offering phones for sale in designer colors
C) Making phones smaller
D) Creating several ring-tone options for mobile phones
Q2) Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 4 activities that occur at the manufacturing plant monthly: The above activities are used by the two departments as follows: How much of the total activity costs will be allocated to Assembly?
A) $300,000
B) $275,000
C) $380,000
D) $350,000
Q3) Each cost pool in an ABC system has its own cost allocation rate.
A)True
B)False
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Chapter 9: Relevant Costs for Decision Making
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Sample Questions
Q1) A factor in special order decisions is the effect that the decision will have on regular customers.
A)True
B)False
Q2) Which of these is an opportunity cost associated with dropping a business segment?
A) The revenue given up
B) The avoidable fixed costs
C) The benefits from using excess capacity for something else
D) The increase in employee morale
Q3) In the decision to drop a product line, fixed costs are often classified as
A) Avoidable or sunk
B) Sunk or opportunity
C) Product or period
D) Incremental or avoidable
Q4) Relationships with resource suppliers are not a consideration in constrained resource decisions.
A)True
B)False
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Chapter 10: Standard Costs, Flexible Budgets and Variance Analysis
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Sample Questions
Q1) Everett Ltd budgeted $1,488,000 for total overhead. The standard variable overhead rate was $2 per direct labor hour, or $6 per unit, based on an anticipated activity level of 600,000 direct labor hours. During the year 220,000 units were produced. Fixed overhead costs incurred were $300,000. The variable overhead budget variance was $19,800 unfavorable, and the actual variable overhead rate was $2.10 per direct labor hour. The standard direct labor hours allowed were
A) 744,000
B) 600,000
C) 660,000
D) 545,600
Q2) If a variance is unfavorable, it should be closed directly to cost of goods sold.
A)True
B)False
Q3) Normal fluctuations in labor hours may cause a favorable direct labor efficiency variance.
A)True
B)False
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Page 12
Chapter 11: Operational Budgets
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Sample Questions
Q1) ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: If ATR had a budgeted volume of 2,000 units, the total budgeted product cost for the third quarter of 2010 would have been
A) $22,000
B) $16,000
C) $20,500
D) None of the above
Q2) A formalised financial plan for organisational operations in the coming year is best described as a
A) Long-term strategy
B) Short-term operating plan
C) Budget
D) Decision right
Q3) To prepare a budgeted income statement, managers draw data from the revenue budget, the cost of goods sold budget, and the cash budget.
A)True
B)False
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Chapter 12: Strategy and Control
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Sample
Questions
Q1) Under the Ittner and Larcker management framework which of these is not a limitation of using Economic Value Added (EVA) as a measure of value added by management?
A) It is a measure of the past
B) It is based on short-term performance
C) EVA can only be calculated for stock exchange listed companies.
D) None of the above, i.e. all are limitations
Q2) Which of these is not one of the key questions in Otley's performance management systems framework?
A) What are the key success factors?
B) What are the key performance measures?
C) What products or services does the organisation provide
D) None of the above, i.e. all are key questions
Q3) Strategic management accounting is essentially theoretical in nature.
A)True
B)False
Q4) Management accounting is now seen as a useful vehicle by which to implement economic theory and social and environmental change.
A)True
B)False
Page 14
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Chapter 13: Planning and Budgeting for Strategic Success
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Sample Questions
Q1) The core of the Beyond Budgeting movement rests with extreme centralisation.
A)True
B)False
Q2) Beyond Budgeting proponents argue that the key to instilling accountability originates from the belief that employees enjoy contributing to the organisation.
A)True
B)False
Q3) Which of these is a contemporary approach to budgeting?
A) flexible budgeting
B) static budgeting
C) incremental budgeting
D) none are contemporary approaches to budgeting
Q4) Strategic budgeting is the process of considering the effect alternative courses of action on profits, assets and cash flow management.
A)True
B)False
Q5) The Beyond Budgeting philosophy means managing without budgets.
A)True
B)False
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Chapter 14: Capital Budgeting and Strategic Investment
Decisions
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Sample Questions
Q1) Income taxes have a major effect on capital budgeting decisions.
A)True
B)False
Q2) Bailey Pty Ltd is considering modernising its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: The income tax rate is 40%, and the required rate of return is 16%. Depreciation is $5,000 per year for the old machine. The new machine would be depreciated $7,600 in 2008, $5,700 in 2009, $3,800 in 2010, and $1,900 in 2011. Assume Bailey would purchase the new machine in December 2007 and dispose of the old machine in January 2008.
The relevant annual pretax cash operating cost associated with Bailey's decision will be A) $4,000
B) $14,000
C) $18,000
D) $2,400
Q3) Managers should consider qualitative information in making capital budgeting decisions.
A)True
B)False
Page 16
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Chapter 15: The Strategic Management of Costs and Revenues
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Sample Questions
Q1) Which of these activities is not typically considered to be part of a manufacturing organisation's value chain?
A) Making journal entries
B) Handling customer complaints
C) Designing and engineering new products
D) Manufacturing products
Q2) WDY currently sells its primary product for $85 per unit, with a profit margin of 30%. Cost of goods sold totals 40% of the product's total cost. WDY's managers are considering implementing a kaizen costing system. WDY's current product cost (direct costs and manufacturing overhead) per unit is
A) $25.50
B) $59.50
C) $23.80
D) $15.30
Q3) A target cost is the minimum cost a company should strive for to obtain its desired profit margin.
A)True
B)False
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Chapter 16: Strategic Management Control: a Lean Perspective
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Sample Questions
Q1) Lean accounting embraces full absorption costing.
A)True
B)False
Q2) It is correct that under a successful just-in-time production and inventory control system:
A) there must be only one supplier
B) distance from the supplier is not an issue as long as the supplier is reliable
C) suppliers will normally make frequent deliveries of small lots of materials
D) all of the above are correct
Q3) The theory of constraints (TOC) involves imposing strict controls and standards on all aspects of the value chain in order to improve efficiency.
A)True
B)False
Q4) A limitation of the theory of constraints and throughput costing is that:
A) Management's attention is too focused on long-term results
B) Labour and overhead costs may be built up to excessive levels
C) Any product mix changes would not generate immediate cash flow effects
D) a and b are limitations
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Chapter 17: Responsibility Accounting, Performance
Evaluation and Transfer Pricing
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Sample Questions
Q1) Technical details about complex manufacturing processes are examples of specific knowledge.
A)True
B)False
Q2) When a company uses activity-based transfer prices
A) The internal buyer is motivated to overstate the number of units to buy internally
B) The internal buyer is motivated to understate the number of units to buy internally
C) Capacity is usually reserved for products or services that are transferred internally
D) Batch-level costs are excluded from the computation
Q3) An advantage of centralised decision making is
A) More motivated employees
B) More rapid decision making in all contexts
C) Greater effectiveness in volatile environments
D) Less monitoring of decisions
Q4) An ideal transfer price would be the opportunity cost of internal transfers.
A)True
B)False
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Chapter 18: The Balanced Scorecard and Strategy Maps
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Sample Questions
Q1) The balanced scorecard approach has been criticised for not capturing core values related to
A) Relations with regulators or approaches to the environment
B) Customer satisfaction
C) Shareholder returns
D) Employee attitudes
Q2) Following are some of the steps in implementing a balanced scorecard. Which one of these steps would be performed last?
A) Investigate variances and reward employees.
B) Collect and analyse scorecard data to monitor performance.
C) Clarify organisational vision and strategies.
D) Establish action plans.
Q3) Components of organisational strategy include
A) Short-term financing
B) Actual operations
C) Financial structure
D) Comparing actual results to the budget
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Chapter 19: Rewards, Incentives and Risk Management
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Sample Questions
Q1) It is more likely that the performance of a top executive will be measured at which of these levels?
A) individual
B) department
C) product
D) corporate
Q2) Research has found that in Australia in the last 10 years CEO's salaries have increased at 10 times the rate of shareholder's returns.
A)True
B)False
Q3) Which of these is an advantage of rewarding senior executives with cash rather than with non-cash payments?
A) It helps to overcome the agency problem
B) It is likely to be preferred by a risk-averse executive
C) The lasting nature of cash
D) All of the above are advantages
Q4) Reward systems at top management level are most commonly fixed payment packages.
A)True
B)False
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Chapter 20: Sustainability Management Accounting
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Sample Questions
Q1) The balanced scorecard is seen more as a strategy communication tool rather than a tool useful for sustainability performance evaluation.
A)True
B)False
Q2) Employees will always make ethical decisions if they act in the best interests of their shareholders.
A)True
B)False
Q3) The issue that cannot be related to sustainability is:
A) customer privacy
B) packaging
C) bribery and kickbacks
D) none of the above, i.e. all can be related to sustainability
Q4) Ethical behavior is an individual obligation, not an organisational obligation.
A)True
B)False
Q5) Life cycle analysis ends with the sale of the product.
A)True
B)False
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