Financial Planning and Analysis
Practice Questions
Course Introduction
Financial Planning and Analysis provides students with a comprehensive understanding of how organizations manage their financial resources to achieve strategic objectives. The course covers core concepts such as budgeting, forecasting, financial modeling, variance analysis, and performance measurement, emphasizing the importance of data-driven decision-making in business contexts. Students learn to interpret financial statements, assess company performance, and develop financial plans that align with business goals. Real-world case studies and hands-on exercises are used to illustrate analytical techniques and the practical application of financial tools, preparing students for roles in corporate finance, consulting, and investment analysis.
Recommended Textbook
Managerial Accounting 2nd Edition by Charles
E. Davis
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Chapter 1: Accounting As a Tool for Management
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Q1) One of the primary products of the operations planning stage will likely be a
A)Projected income statement.
B)Pro forma balance sheet.
C)Budget.
D)None of these ans choices are correct.
Answer: C
Q2) The American Institute of Certified Public Accountants is the leading organization for management accountants in the United States.
A)True
B)False
Answer: False
Q3) Managerial accounting provides reports and information for a range of decision makers outside an organization.
A)True
B)False
Answer: False
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Chapter 2: Cost Behavior and Cost Estimation Summary of
Questions by Objectives and Blooms Taxonomy
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Q1) You are considering moving off campus.You have found a two-bedroom apartment for $1,200 per month,but you cannot afford that much rent.You are considering inviting up to three of your friends to become your roommates.The relationship between the number of roommates,the total cost,and the cost per person is: \(\begin{array}{lcr} \textbf { Number of } & \textbf { Total } & \textbf { Cost per } \\ \textbf { Roommates } & \textbf { Cost } & \textbf { Person } \\ \hline
1 & \$ 1,200 & \$ 1,200 \\
2 & \$ 1,200 & \$ 600 \\
3 & \$ 1,200 & \$ 400 \\
4 & \$ 1,200 & \$ 300 \end{array}\) This is an example of
A)A fixed cost.
B)A variable cost.
C)A mixed cost.
D)A step cost.
Answer: A
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Chapter 3: Cost-Volume-Profit Analysis and Pricing
Decisions
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Q1) One of the activities managers like to engage in is called "what-if" analysis,or sensitivity analysis.
A)True
B)False
Answer: True
Q2) On the breakeven graph,any level of sales to the right of the breakeven point represents
A)Fixed cost.
B) Variable cost.
C)Operating income.
D)Operating loss.
Answer: C
Q3) Which of the following is an assumption made in a multiproduct environment?
A)The sales mix can be determined and will remain constant.
B)The sales mix must be broken into variable,fixed,and mixed costs.
C)The relevant range will vary with a change in activity.
D)Fixed costs are no longer static.
Answer: A
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Chapter 4: Product Costs and Job Order Costing
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Sample Questions
Q1) What items decrease the following accounts: Raw Materials Inventory,Work in Process Inventory,Finished Goods Inventory,Manufacturing Overhead,and Cost of Goods Sold?
Q2) Watson,Inc.applies overhead cost based on direct labor hours.In completing the 200 units in job #120, the company incurred $12,000 in direct materials and 500 direct labor hours at $18 per hour. The predetermined overhead rate is $6 per direct labor hour. What is the total cost of the units in job #120?
A) $18,600
B) $21,000
C) $22,200
D) $24,000
Q3) Finished Goods Inventory decreases by the
A)Cost of goods manufactured.
B)Overhead applied.
C)Cost of selling the product.
D)Cost of goods sold.
Q4) Why must manufacturing overhead be allocated,what is the predetermined overhead rate and how is it calculated?
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Chapter 5: Planning and Forecasting
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Q1) Mounce,Inc.produces and sells free-standing quilt frames.In budgeting for production needs,the company requires that 10% of the next month's sales be on hand at the end of each month.Budgeted sales of quilt frames over the next four months are: \[ \begin{array}{lrrrr} &\underline{\text{September}} & \underline{\text{October}} & \underline{\text{November}} & \underline{\text{December}} \\ \text{Budgeted unit sales} & 25{,}000 & 32{,}000 & 56{,}000 & 48{,}000 \end{array} \]
Budgeted production for October would be A) 26,650. B) 34,400. C) 35,100. D) 37,600.
Q2) What are two tradeoffs between ideal standards and practical standards that a student might be willing to accept for a Principles of Accounting class?
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Chapter 6: Performance Evaluation: Variance Analysis
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Q1) The direct materials quantity variance is calculated using which of the three amounts?
A)Actual quantity used,standard quantity allowed for actual production,actual price paid
B)Actual quantity used,standard quantity allowed for actual production,standard price paid
C)Standard quantity used,actual price paid,standard price paid
D)Actual quantity used,actual price paid,standard price paid
Q2) A material variance is one that is large enough to make a difference in the outcome of a decision.
A)True
B)False
Q3) Actual direct labor costs may differ from the flexible budget amounts because
A)The company may set a standard wage rate,but the market forces may require a change in that rate.
B)Employees do not always operate at the desired efficiency level.
C)The company may set a standard wage rate,but the market forces may require a change in that rate or employees do not always operate at the desired efficiency level.
D)None of these ans choices are correct.
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Chapter 7: Activity-Based Costing and Activity Based Management
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Sample Questions
Q1) Which of the following activities would be classified as non-value-added in the manufacture of decorative pillows?
A)Cutting
B)Sewing
C)Storing
D)Stuffing
Q2) The key to reducing costs through activity management is
A)Eliminating high-cost executive positions.
B)Eliminating activities such as inspections.
C)Eliminating the resources associated with the reduced activities.
D)All of these ans choices are keys to reducing costs through activity management.
Q3) Which of the following would be considered a batch-level activity?
A)Engineering changes made on the assembly line
B)Quality tests
C)Warehouse costs
D)None of these ans choices are correct.
Q4) Product-level activities are also referred to as product-sustaining activities.
A)True
B)False
9
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Chapter 8: Using Accounting Information to Make Managerial Decisions
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Sample Questions
Q1) Your friend purchased a non-refundable ticket to a popular Broadway play for Friday night.Yesterday she was invited to spend Friday on the lake with a group of sorority sisters.Her only cost will be for personal items such as lunch.The lake is two hours away from her apartment and the play is another hour in the opposite direction.She knows that if she goes to the lake,she will not get back in time to attend the play.Which of the following is \(\textbf{ not }\) a relevant cost in making her decision on whether to go to the play or to the lake?
A)The price of the ticket
B)The price of eating out at the lake
C)The price of renting an umbrella at the lake
D)The price of driving to the play
Q2) Avoidable costs are those costs that
A)Are always variable.
B)Are always fixed.
C)Occur only with the implementation of a particular alternative.
D)None of these ans choices are correct.
Q3) What is an What is an opportunity cost and what is the impact of opportunity cost on a decision to outsource the production of an item?
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Chapter 9: Capital Budgeting
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Q1) The process of determining how much an amount of money to be received in the future is worth today is called
A)Present value
B)Hurdling
C)Discounting
D)None of these ans choices are correct
Q2) Investing in a capital project may involve making screening decisions,preference decisions and funding decisions.Discuss how each of the decisions is made,the goal of each,and give an example of each.
Q3) Which of the following is a weakness of the accounting rate of return?
A)It does not consider cash flows
B)It does not consider the time value of money
C)Both that it does not consider cash flows and that it does not consider the time value of money
D)Neither that it does not consider cash flows nor that it does not consider the time value of money
Q4) Capital budgeting differs from cash budgeting in terms of its time horizon.
A)True
B)False
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Chapter 10: Decentralizing and Performance Evaluation
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Q1) Which of the following terms are used in referring to common costs?
A)Allocated cost
B)Unavoidable costs
C)Both allocated cost and unavoidable costs.
D)Neither allocated cost nor unavoidable costs.
Q2) Generally accepted accounting principles require companies to report selected information about operating segments in the annual report.
A)True
B)False
Q3) An investment center manager's performance can be based on
A)The same methods as managers of cost centers.
B)The same methods as managers of profit centers.
C)Either the same methods as managers of cost centers or the same methods as managers of profit centers.
D)Neither the same methods as managers of cost centers nor the same methods as managers of profit centers.
Q4) What is EVA and how is it calculated?
Q5) What is a transfer price? List the four ways of determining a transfer price.
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Chapter 11: Performance Evaluation Revisited: a Balanced Approach
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Q1) Return on investment,residual income,and EVA all have qualitative components.
A)True
B)False
Q2) Which of the following is \(\textbf{ not }\) a measure that relates to the internal business processes perspective?
A)Percentage of on-time deliveries
B)Response time to customer request
C)Delivery cycle time
D)Product return rate
Q3) When using the balanced scorecard to monitor performance,the learning and growth perspective Answers which of the following questions?
A)Are we developing employees and providing technologies that facilitate change and improvement?
B)Are we creating products and hiring employees with skills to create product and deliver them in a timely manner?
C)Are we meeting our stakeholders' expectations?
D)Are we growing in a manner to be competitive in the industry?
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) A helpful approach to examine changes in the relative size of account balances within a single statement is referred to as
A)Common-size analysis.
B)Vertical analysis.
C)Trend analysis.
D)Common-size analysis and Vertical analysis,but not Trend analysis.
Q2) On a common-size income statement,interest expense is shown as a percentage of
A)Operating income.
B)Net sales revenue.
C)Net income.
D)Gross profit.
Q3) The difference between a firm's current assets and its current liabilities is
A)Cash flow.
B)Working capital.
C)Current ratio.
D)None of these ans choices are correct.
Q4) Land is the ultimate liquid asset.
A)True
B)False
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Chapter 13: Statement of Cash Flows
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Q1) For the past two years,Monroe Corporation's statement of cash flows has shown net cash provided by financing activities.Which of the following choices could explain this result?
A)Collection of accounts receivable balances
B)Sales of factory equipment
C)Receipt of cash dividends from investments in other company's stock
D)Issuance of long-term debt
Q2) Which of the following would be considered a source of cash on the statement of cash flows?
A)Purchase of equipment
B)Receipt of interest income
C)Payments of accounts payable invoices
D)Payment of dividends to stockholders
Q3) The statement of cash flows explains the change in the Cash account balance between the beginning of the period and showing how cash was generated and spent.
A)True
B)False
Q4) What is the basic form of the statement of cash flows?
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Chapter 14: Topic Focus: Process Costing
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Q1) At the end of January, Monroe Industries had completed 65,000 units and left 8,000 units in Work In process, 60% complete with respect to materials and 80% complete with respect to conversion. Conversion costs will be assigned to how many equivalent units in the ending work in process inventory?
A) 1,600
B) 6,400
C) 4,800
D) 8,000
Q2) Which of the following is \(\textbf{ not }\) a step in calculating the
A)Calculate the equivalent
B)Allocate the equivalent
C)Divide the total equivalent costs by the total
D)Reconcile the costs of production
Q3) In process costing,all materials are added at the beginning of the production process,then labor and overhead is added during the production process.
A)True
B)False
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Chapter 15: Topic Focus Variable and Absorption Costing
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Sample Questions
Q1) The underlying principle that absorption costing satisfies is the
A)Matching principle
B)Relevance principle
C)Historical cost principle
D)Understandability principle
Q2) In absorption costing,all manufacturing costs are considered to be
A)Product costs
B)Period costs
C)Variable costs
D)Mixed costs
Q3) To make predictions about costs and income,you must first separate costs by their behavior.
A)True
B)False
Q4) Describe the format for a variable costing income statement.
Q5) Which of the following is \(\textbf{ not }\) a product cost?
A)Direct material
B)Direct labor
C)Selling expenses
D)Manufacturing overhead
17
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Chapter 16: Topic Focus Standard Costing Systems
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Q1) At what amount will the inventory and cost of goods sold amounts be reported on the financial statements?
A)Inventory at standard and cost of goods sold at actual
B)Inventory at actual and cost of goods sold at actual
C)Inventory at standard and cost of goods sold at standard
D)Inventory at actual and cost of goods sold at standard
Q2) The easiest way to dispose of variances at the end of the period is to A)Ignore the variances as they will cancel out during the following period.
B)Close the variances to raw materials inventory.
C)Close the variances to the appropriate raw materials inventory,work in process inventory,and finished goods inventory accounts.
D)Close the variances to the cost of goods sold account.
Q3) When using a standard costing system,all product costs are recorded at standard cost while the products are being made.
A)True
B)False
Q4) What is the difference between a normal costing system and a standard costing system?
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Chapter 17: Topic Focus Customer Profitability
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Q1) The formula for the customer profit margin is
A)Customer net profit divided by customer revenue
B)Customer revenue divided by customer cost of goods sold
C)Customer revenue less cost of goods sold less allocated selling expenses
D)Customer profit margin less allocated selling and administrative expenses
Q2) Before a manager decides to drop an unprofitable customer,the manager should evaluate all the implications of the action for the affected customer,for other customers,and for the company.
A)True
B)False
Q3) Measuring customer profitability only by looking at whether the sales revenue a customer generates exceeds the cost of goods sold ignores
A)All the selling and administrative costs incurred to provide customer service and support.
B)Manufacturing costs incurred as overhead.
C)All fixed costs.
D)None of these ans choices are correct.
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