Financial Planning and Analysis Study Guide
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Course Introduction
Financial Planning and Analysis is a course designed to equip students with the essential skills and knowledge required to manage and assess an organizations financial health. The course covers key concepts such as budgeting, forecasting, financial modeling, performance measurement, and variance analysis. Students learn how to interpret financial statements, identify trends, and develop strategies to optimize business outcomes. Through practical case studies and real-world applications, the course emphasizes the role of financial planning in strategic decision-making, resource allocation, and long-term value creation for stakeholders.
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Managerial Accounting 3rd Edition by Charles E. Davis
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Page 2
Chapter 1: Accounting As a Tool for Management
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Sample Questions
Q1) Which of the following is not a correct statement relating to the balanced scorecard?
A)It was developed in the early 1990s by David Norton and Robert Kaplan.
B)It is a collection of performance measures that track an organization's progress toward achieving its goals.
C)The selection of performance measures used is driven by the organization's network of facilities used to produce and deliver its product.
D)It uses both financial and non-financial performance measures.
Answer: C
Q2) Frequent feedback from planning,controlling,evaluating,and decision making activities creates which of the following types of decision-making process?
A)Linear
B)Circular
C)Scattered
D)Linear and scattered
Answer: B
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3
Chapter 2: Cost Behavior and Cost Estimation
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Q1) If activity level decreases,what happens to the total variable cost?
A)It decreases.
B)It increases.
C)It remains the same.
D)It depends on how much the activity level increases.
Answer: C
Q2) When production and sales are equal,a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.
A)True
B)False
Answer: True
Q3) A contribution format income statement just rearranges the individual costs components and produces the same operating income as the traditional functional income statement.
A)True
B)False
Answer: False
Q4) Assume a selling price of $20 per
Answer: 11ea84e3_90aa_8bef_abcc_e7ef813f4d82_TB3446_00
Page 4
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Chapter 3: Cost-Volume-Profit Analysis and Pricing
Decisions
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Q1) To find the breakeven point,set the standard profit equation equal to zero,let x equal the total costs,and then solve for x.
A)True
B)False
Answer: False
Q2) Assume a sales price per
A)720 units
B)1,200 units
C)1,800 units
D)None of these answer choices is correct.
Answer: C
Q3) All other things equal,an increase in the number of
A)Increase unit contribution margin.
B)Increase unit variable costs.
C)Increase total fixed costs.
D)Increase operating income.
Answer: D
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Page 5
Chapter 4: Product Costs and Job Order Costing
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Sample Questions
Q1) Asheville Office Equipment,Inc.manufactures custom filing cabinets.Alma Ortiz,president of Asheville Office Equipment,Inc.,has gathered the following cost information from the company's accounting records for the latest month of operations.
Advertising $15,000
Fire insurance premium for the factory equipment 5,000
Sales office depreciation 2,000
Oil for the machines used to produce the cabinets 1,500
Wood used to produce the cabinets 30,000
Property taxes on the factory building 8,000
Freight to ship the cabinets to customers 2,500
Sales department salaries 34,000
Production supervisors' salaries 18,000
Assembly line workers' wages 45,000
Required
a.Calculate the total period costs for the month.
b.Calculate the total product costs for the month.
c.Calculate the amount of manufacturing overhead incurred for the month.
Q2) Describe the three major categories of product cost and explain why some raw materials costs and some labor costs are treated as manufacturing overhead.
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Page 6
Chapter 5: Planning and Forecasting
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Q1) In the manufacturing of swim suits,in addition to the price of fabric,the standard materials price also includes
A)cost of shipping.
B)volume discounts.
C)taxes.
D)All of these answer choices are correct.
Q2) The terms standard price and standard cost can be used interchangeably.
A)True
B)False
Q3) The predetermined overhead rate is calculated as Budgeted Total Manufacturing Overhead divided by Budgeted Activity Level of Application Base.
A)True
B)False
Q4) A bottom-up budget approach is also referred to as
A)participative budgeting.
B)imposed budgeting.
C)responsibility budgeting.
D)none of these answer choices are correct.
Q5) Berry Products Company manufactures and sells a single product.Each
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Chapter 6: Performance Evaluation: Variance Analysis
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Q1) Luckett Company's standards call for two feet of direct material for each
Q2) The fixed overhead spending variance is the difference between actual fixed overhead cost and budgeted fixed overhead cost.
A)True
B)False
Q3) Which of the following is a possible reason why actual prices might differ from standard prices,resulting in a direct materials price variance?
A)The company may receive a discount for materials that are purchased in large quantities.
B)The company may receive a reduced price from a new vendor to generate business.
C)The vendors may change their prices as a result of changes in the market.
D)All of these answer choices are correct.
Q4) The flexible budget variance reflects
A)how efficiently the company operated in producing a given level of sales.
B)how effectively the company reached its strategic goals.
C)a different volume of products than that specified in the static budget.
D)only favorable variances.
Q5) Amos,Inc.uses a standard cost system with the following labor standards for one
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Chapter 7: Activity-Based Costing and Activity Based Management
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Q1) In an activity-based costing system,which of the following is not a category in which activities are classified?
A)Unit-level
B)Product-level
C)Industry-level
D)Customer-level
Q2) Processing a sales order is an example of a
A)product-level activity.
B)unit-level activity.
C)customer-level activity.
D)group-level activity.
Q3) A company that is interested in maximizing profits will instruct its sales force to emphasize its
A)products with the least non-value-added activities.
B)oldest products.
C)most profitable products.
D)least profitable products.
Q4) Delivery of goods to customer job sites
Required:
Identify at least one possible cost driver for each activity cost pool.
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Chapter 8: Using Accounting Information to Make Managerial Decisions
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Sample Questions
Q1) The Theory of Constraints seeks to maximize throughput contribution,which equals sales revenue less direct materials cost.
A)True
B)False
Q2) Which of the following is not relevant to a decision involving the allocation of a single constrained resource among multiple products? aaa.
Q3) Incremental analysis helps decision makers to understand
A)the sunk costs involved in their decision.
B)the impact of their choices.
C)the classification of costs.
D)the materiality of a situation.
Q4) A dance studio is considering a plan to add ballroom dance to its offerings.Which of the following is a not relevant consideration in this decision?
A)Will the studio have to hire an additional instructor?
B)Will another class have to be dropped if ball room dancing is offered?
C)Is there a demand for ballroom dancing?
D)What is book value of the old equipment?
Q5) Paris Manufacturing Company Inc.uses 400
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Chapter 9: Capital Budgeting
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Q1) The time it takes,in years,for an investment to return the original amount of invested capital is referred to as
A)Payback period.
B)Period of return.
C)Investment return period.
D)Capital return period.
Q2) Which of the following is not a step in the net present value approach to capital budgeting?
A)Identify the amount and timing of each cash flow
B)Determine the payback period
C)Calculate the present value of each cash flow
D)Calculate the net present value of the project
Q3) The process of determining how much an amount of money to be received in the future is worth today is called future value.
A)True
B)False
Q4) The accounting rate of return is also known as the unadjusted rate of return.
A)True
B)False
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Chapter 10: Decentralizing and Performance Evaluation
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Q1) Marshall Industries operates as an investment center.Buddy Hall,the region's division manager,has set a required minimum rate of return of 15%.Marshall's total assets are $350,000,current liabilities are $150,000,and operating income is $60,000.The company's weighted-average cost of capital is 18% and its tax rate is 28%.
Required:
Calculate Marshall's EVA.Show your work.
Q2) Ruhlen Corporation's Small Craft division reported a net operating loss of $2,300,000 in the most recent reporting period.The division absorbed common fixed corporate expenses of $2,500,000.The division's segment margin is
a.$2,500,000.
b.$2,300,000.
c.$200,000.
d.$4,800,000.
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)Residual income.
D)All of these answer choices are correct.
Q4) What is EVA and how is it calculated?
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Chapter 11: Performance Evaluation Revisited: a Balanced Approach
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Sample Questions
Q1) Which of the following is an example of an internal operating nonfinancial measure?
A)Accidents per month
B)Labor productivity
C)Market share
D)Product flexibility
Q2) A management tool that integrates performance measures across four different perspectives to guide operations toward achieving an organization's strategy is called
A)performance dashboard.
B)balanced scorecard.
C)key performance measures.
D)None of these answer choices are correct.
Q3) When using the balanced scorecard to monitor performance,which of the following perspectives is the foundation for improvement in all other areas?
A)Internal business processes
B)Financial
C)Learning and growth
D)Customer
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Page 13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Which of the following is the reason that preferred dividends are deducted from net income in calculating earnings per share?
A)Because preferred dividends are not paid from net income.
B)Because preferred dividends are not a part of stockholders' equity.
C)Because preferred dividends are paid to preferred stockholders,not common stockholders.
D)Because preferred dividends are not paid until all common stockholders have received their dividends,so preferred dividends are not relevant in the formula and so must be taken out of the equation.
Q2) While the current and acid-test ratios provide information about liquidity,they do not indicate the underlying quality of current assets.
A)True
B)False
Q3) ABC Corporation reported net income of $26,000 last year.The company reported earnings per share of $2.80.ABC paid dividends of $1.75 on each share of outstanding stock.What was ABC's dividend payout ratio?
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14
Chapter 13: Statement of Cash Flows
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Sample Questions
Q1) Investing activities involve
A)Borrowing and repaying of debt
B)Sale of inventory
C)Receipt of interest
D)Investments in assets other than current operating assets
Q2) On January 1st of the current year Bratton Manufacturing borrowed $1,000,000 from the First National Bank.On June 30<sup>st</sup> and December 31<sup>st</sup> Bratton made payments of $10,000 each.How will these transactions be reported in the statement of cash flows?
A)$1,000,000 source of cash and $20,000 use of cash,both shown in the financing section
B)$1,000,000 source of cash in the financing section and $20,000 use of cash in the operating section as a use of cash
C)$1,000,000 source of cash in the investing section and $20,000 use of cash in the operating section
D)$1,000,000 source of cash and $20,000 use of cash,both shown in the investing section
Q3) What is the basic form of the statement of cash flows?
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Page 15
Chapter 14: Topic Focus: Process Costing
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Sample Questions
Q1) Which of the following is a difference between job order costing and process costing systems?
A)Companies that use a process costing system accumulate product costs throughout the production process while companies that use a job order costing system accumulate product cost only at the end of the production process.
B)Companies that use a process costing system accumulate product costs in each production department and allocate the costs evenly across all units produced in the department during the period while companies that use job order costing accumulate product costs by job and allocate those costs only to the units in that particular job.
C)Companies that use a process costing system accumulate direct material and direct labor,but not manufacturing overhead while companies that use a job order costing systems accumulate direct material,direct labor and manufacturing overhead.
D)A process costing system would be appropriate for a company that manufactures custom solar panels while a job order costing system would be appropriate for a company which manufactures a line of solar panels.
Q2) When using a process costing system,explain the steps you use in assigning costs to
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16
Chapter 15: Topic Focus Variable and Absorption Costing
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Sample Questions
Q1) Absorption costing is also referred to as
A)variable costing.
B)full costing.
C)nominal costing.
D)period costing.
Q2) Walker Manufacturing began its operations on January 1 of the current year.Walker produced 10,000
A)$26,000
B)$6,000
C)$8,400
D)$10,000
Q3) When production volume exceeds sales volume,net income will be higher when using absorption costing than when using variable costing.
A)True
B)False
Q4) To make predictions about costs and income,costs must be classified as either A)fixed or variable.
B)product or administrative.
C)direct material or conversion.
D)direct or indirect.
Page 17
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Chapter 16: Topic Focus Standard Costing Systems
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Q1) When using a standard costing system,which of the following should be recorded when variable overhead is applied during the period?
A)Debit manufacturing overhead for the actual overhead costs and credit work in process inventory using a predetermined variable overhead rate
B)Debit work in process inventory for the actual overhead costs and credit manufacturing overhead using a predetermined variable overhead rate
C)Credit manufacturing overhead using the standard quantity of the application base and debit work in process inventory using a predetermined variable overhead rate
D)Credit manufacturing overhead using the actual quantity of the application base and debit work in process inventory using a predetermined variable overhead rate
Q2) Wolfe Manufacturing has provided the following information related to fixed overhead.
Standard hours per
a.Calculate the fixed overhead spending variance for the period.
b.Calculate the fixed overhead volume variance for the period.
Q3) Haven Industries transferred 5,500
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Chapter 17: Topic Focus Customer Profitability
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Q1) In their book Killer Customers,Larry Selden and Geoffrey Colvin estimate what percentage of a company's customers generates approximately 120% of a company's profits?
A)20%
B)40%
C)60%
D)80%
Q2) The customer profit margin allows managers to compare customers based on how much each dollar of revenue they generate goes to the bottom line,regardless of the customers' absolute sales volume.
A)True
B)False
Q3) Raising prices for unprofitable customers is a reflection of the cost of doing business with them.
A)True
B)False
Q4) If unprofitable customers cannot be turned to profitable ones,the company should never drop them.
A)True
B)False
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