Managerial Finance Exam Review
Course Introduction
Managerial Finance is a course designed to introduce students to the key principles and concepts of financial management within a business context. The course covers fundamental topics such as financial statement analysis, planning and forecasting, the time value of money, risk and return, capital budgeting, and the cost of capital. Students will learn how managers use financial information to make informed decisions about resource allocation, investment opportunities, and financing strategies. Emphasis is placed on the application of analytical tools and techniques to real-world business scenarios, enabling students to understand the financial implications of managerial decisions and the critical role finance plays in achieving organizational goals.
Recommended Textbook
Introduction to Management Accounting 16th Edition by Charles T. Horngren
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17 Chapters
2438 Verified Questions
2438 Flashcards
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Chapter 1: Managerial Accounting,the Business
Organization,and Professional Ethics
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The function of the value chain that provides support activities to the customer is called ________.
A) marketing
B) distribution
C) customer service
D) consumer relations
Answer: C
Q2) Here is a statement from the Statement of Ethical Professional Practice drafted by the Institute of Management Accountants: "Each member has a responsibility to perform professional duties in accordance with relevant laws,regulations and technical standards." This statement comes from the ________ standard.
A) credibility
B) confidentiality
C) competence
D) professional responsibility
Answer: C
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Chapter 2: Introduction to Cost Behavior and Cost Volume
Profit Relationships
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Henricks Company has the following information available: \(\begin{array}{ll}
\text { Revencie }&\$500,000\\
\text { Variable production costs }&\$100,000\\
\text { Fixed production costs }&\$100,000\\
\text { Variable selling costs } & \$ 50,000 \\
\text { Fixed selling costs } & \$ 50,000 \end{array}\)
What is the gross margin and net income?
A) $200,000; $200,000
B) $250,000; $150,000
C) $300,000; $200,000
D) $400,000: $200,000
Answer: C
Q2) A cost-volume-profit graph has a line for ________ and a line for ________.
A) revenues; variable costs only
B) revenues; fixed costs only
C) revenues; total costs
D) net profit; net loss
Answer: C
Page 4
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Chapter 3: Measurement of Cost Behavior
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Account analysis ________.
A) is less expensive than engineering analysis
B) is more expensive than engineering analysis
C) cannot be used for mixed costs
D) does not require accounts from the accounting system
Answer: A
Q2) A mixed-cost function is graphed as a ________.
A) nonlinear line
B) curved line
C) line with a break for fixed costs
D) straight-line
Answer: D
Q3) A disadvantage of the high-low method to estimate a cost function is ________.
A) historical data may hide past inefficiencies
B) historical data may be obsolete
C) historical data may not reflect changes made in the organization
D) all of the above
Answer: D
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5
Chapter 4: Cost Management Systems and Activity-Based
Costing
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) In a merchandising company,________.
A) selling and administrative costs are period costs
B) insurance expense on the corporate building is a product cost
C) Work-In-Process Inventory may be present
D) Finished Goods Inventory may be present
Q2) Which of these costs is a direct cost for a manufactured wood chair?
A) Rent Expense for factory building
B) Depreciation Expense on factory equipment
C) Wood used to manufacture chair
D) Salary Expense of factory supervisor
Q3) When comparing traditional costing systems to activity-based costing systems,the analysis reveals that ________.
A) high volume products are undercosted with traditional costing systems
B) high volume products are overcosted with traditional costing systems
C) low volume products are overcosted with traditional costing systems
D) both high volume and low volume products are undercosted with traditional costing systems
Q4) A merchandising company has Raw Materials Inventory.
A)True
B)False
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Chapter 5: Relevant Information for Decision Making With a
Focus on Pricing Decisions
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) How do managers obtain the target cost for a new product under consideration?
Assume the market price per unit is known and it cannot be influenced by management.
A) the sum of all production and nonproduction costs
B) the sum of all production costs
C) price per unit minus gross profit per unit
D) the sum of all variable costs
Q2) On the income statement,the contribution margin is computed using variable manufacturing costs and variable selling and administrative costs.
A)True
B)False
Q3) A small appliance manufacturer is deciding whether to accept or reject a special order for 1,750 appliances.There is sufficient capacity available for the special order.What is relevant information for the decision whether to accept or reject the special order?
A) the cost of the parts for the 1,750 appliances
B) the supervisor's salary in the production area
C) the depreciation on assembly equipment
D) the accountant's salary
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Page 7
Chapter 6: Relevant Information for Decision Making With a
Focus on Operational Decisions
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Chicago Corporation has a joint process that produces three products: X,Y and Z.Each product may be sold at split-off or processed further and then sold.Joint-processing costs for a year amount to $100,000.Other data follows: \(\begin{array}{llll}
&\text { Sales Value }&\text {Separable Processing }&\text {Sales Value }\\ \text {Product }&\text {at Split-Off}&\text {Costs after Split-Off }&\text { at Completion}\\
X & \$ 128,000 & \$ 16,000 & \$ 152,000 \\
Y & 50,000 & 26,000 & 76,000 \\
Z & 25,600 & 20,000 & 40,000 \end{array}\)
Processing Product X beyond the split-off point will cause profits to ________.
A) be unchanged
B) increase by $8,000
C) increase by $24,000
D) decrease by $24,000
Q2) Opportunity costs and outlay costs are widely used synonyms.
A)True
B)False
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Chapter 7: Introduction to Budgets and Preparing the Master Budget
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) The first step in preparing the financial budget is the ________.
A) cash budget
B) capital budget
C) operating expense budget
D) sales budget
Q2) On the cash budget,how do we obtain the available cash balance?
A) beginning cash balance
B) minimum cash balance desired
C) total cash increase from financing plus net cash receipts and disbursements
D) beginning cash balance minus minimum cash balance desired
Q3) A(n)________ starts with the assumption that current activities in a company will not automatically continue in the next period.
A) activity-based budget
B) strategic budget
C) master budget
D) zero-base budget
Q4) An effective budget process communicates from the top down,but not from the bottom up.
A)True
B)False
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Chapter 8: Flexible Budgets and Variance Analysis
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Potter Company has the following information: \(\begin{array}{ll}
\text { Actual operating loss at 5,000 units } & \$(11,000) \\
\text { Budgeted operating income at 5,000 units } & \$ 5,000 \\
\text { Budgeted operating income at 10,000 units } & \$ 12,000 \\
\text { Planned level of operations } & 10,000 \text { units } \\
\text { Actual level of operations } & 5,000 \text { units } \end{array}\)
Assume the cost driver of product costs is units of production.What is the flexible budget variance for operating income?
A) $5,000 Unfavorable
B) $11,000 Unfavorable
C) $16,000 Unfavorable
D) $16,000 Favorable
Q2) The unfavorable variances resulting from ideal standards are intended to constantly remind personnel of the continuous need for improvement.
A)True
B)False
Q3) What are some common causes of unfavorable quantity variances for direct labor?
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Page 10
Chapter 9: Management Control Systems and Responsibility Accounting
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Financial performance of a manager is measured by ________.Financial performance of a segment is measured by ________.
A) contribution by segment; contribution margin
B) contribution margin; net income of segment
C) contribution controllable by segment manager; contribution by segment
D) contribution margin; contribution controllable by segment manager
Q2) Total quality management (TQM)________.
A) does not advocate high quality levels for all products
B) is not used in the development of organizational goals
C) promotes maximizing the cost of quality
D) focuses on the prevention of defects and on the achievement of customer satisfaction
Q3) To calculate income before taxes for a segmented company as a whole,take contribution by segments and subtract ________.
A) allocated costs
B) unallocated costs
C) costs controllable by segment managers
D) costs controllable by third parties
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Chapter 10: Management Control in Decentralized Organizations
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) An ideal performance metric would measure and reward the manager for ________ factors,and neither reward nor punish the manager for ________ factors.
A) allocated; unallocated
B) controllable; uncontrollable
C) unallocated; allocated
D) uncontrollable; controllable
Q2) Multinational companies use transfer prices to minimize worldwide income taxes,________ and ________.
A) tariffs; financial restrictions imposed by U.S. government
B) tariffs; import duties
C) financial restrictions imposed by U.S. government; import duties
D) foreign bribes; import duties
Q3) Decentralization is most successful when an organization's segments are relatively independent of one another.
A)True
B)False
Q4) Incentives do not increase managerial effort toward goal congruence.
A)True
B)False
12
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Chapter 11: Capital Budgeting
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149 Flashcards
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Sample Questions
Q1) Maroon Company is considering the purchase of equipment for $600,000.The equipment will have a ten year life with no terminal salvage value.Straight-line depreciation will be used for tax purposes.It is expected that the equipment will generate annual sales of $400,000 for ten years and annual production costs,exclusive of depreciation,of $300,000 for ten years.The tax rate is 20%.The required rate of return is 12%.The present value of one for ten periods at 12% is 0.322.The present value of an ordinary annuity of one for ten periods at 12% is 5.6502.What is the net present value of the equipment?
A) $(80,182)
B) $32,822
C) $123,226
D) $191,028
Q2) Discounted-cash-flow models are not based on the theory of compound interest.
A)True
B)False
Q3) Two common methods for comparing alternative investments are the total project approach and the conversion approach.
A)True
B)False
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Page 13
Chapter 12: Cost Allocation
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130 Flashcards
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Sample Questions
Q1) If a company allocated fixed costs from service departments to user departments based on long-range plans,there is a tendency on the part of managers to underestimate their planned usage.
A)True
B)False
Q2) Wininger Company has two departments.Relevant information is presented below: \(\begin{array}{lll}&\text { Department } 1&\text { Department } 2\\
\text { Budgeted gross margin } & \$ 100,000 & \$ 500,000 \\ \text { Actual gross margin } & \$ 200,000 & \$ 600,000 \\
\text { Budgeted sales } & \$ 500,000 & \$ 2,000,000 \\
\text { Actual sales } & \$ 300,000 & \$ 2,100,000 \end{array}\)
Corporate management salaries are $3,000,000.The salaries are allocated based on sales using the preferred approach.What amount of salaries is allocated to Department 1?
A) $300,000
B) $375,000
C) $600,000
D) $750,000
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Page 14
Chapter 13: Accounting for Overhead Costs
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Variable costing is also called ________.
A) functional costing
B) indirect costing
C) absorption costing
D) the contribution approach
Q2) The most common reason for a variance between actual overhead costs and applied overhead costs is the actual level of volume does not equal the level used to calculate the budgeted overhead rate.
A)True
B)False
Q3) An unfavorable production volume variance decreases the manufacturing costs shown on the income statement.
A)True
B)False
Q4) To compute contribution margin under variable costing,we deduct ________ and ________ from sales.
A) variable manufacturing costs; fixed manufacturing costs
B) variable selling costs; fixed manufacturing costs
C) variable administrative costs; fixed manufacturing overhead costs
D) variable manufacturing costs; variable selling and administrative costs
Page 15
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Chapter 14: Job-Order Costing and Process-Costing Systems
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) In job-order costing,a debit to Work-In-Process Inventory is used to record
A) a requisition of direct materials for a job
B) the cost of labor used by a job
C) factory overhead applied to a job
D) all of the above
Q2) In job-order costing,the journal entry to record the completion of units in process would include a Debit to Finished Goods Inventory.
A)True
B)False
Q3) In process costing,how many Work-In-Process Inventory accounts are used?
A) none
B) only one
C) one for each processing department
D) at least two for each processing department
Q4) One of the primary purposes of an activity-based costing system is to ________.
A) focus on quality improvements in the production process
B) focus on cost reduction in the production process
C) eliminate all overhead costs for manufactured products
D) increase the accuracy of product costs so managers can make better decisions
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Chapter 15: Basic Accounting: Concepts, techniques, and Conventions
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150 Flashcards
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Sample Questions
Q1) Unexpired costs are expenses.
A)True
B)False
Q2) Source documents are associated with ________.
A) Generally Accepted Accounting Principles
B) implicit transactions
C) explicit transactions
D) compound entries
Q3) On January 1,2015,Arizona Company acquired a machine for $33,000.Annual depreciation expense equals $3,000.The residual value of the machine is $3,000.What is the book value of the machine on December 31,2016?
A) $3,000
B) $27,000
C) $30,000
D) $33,000
Q4) The main sections of the balance sheet include ________.
A) revenues, assets and liabilities
B) assets, liabilities and expenses
C) expenses, revenues and stockholders' equity
D) assets, liabilities and stockholders' equity
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Chapter 16: Understanding Corporate Annual Reports:
Basic Financial Statements
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) The cash paid to purchase equipment is included in the ________ section of the statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Q2) An example of an operating activity on the statement of cash flows is cash dividends received on investments.Assume the direct method is used.
A)True
B)False
Q3) Manufacturers have several inventory accounts that do NOT include ________.
A) Finished Goods Inventory
B) Raw Materials Inventory
C) Work in Process Inventory
D) Construction in Process Inventory
Q4) Freight and installation costs are added to the cost of equipment.
A)True
B)False
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Chapter 17: Understanding and Analyzing Consolidated Financial Statements
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Sample Questions
Q1) On January 1,2014,a parent company purchased 90 percent of the stock in a subsidiary.On January 1,2010,no goodwill was recorded and the book value of the subsidiary's assets equals the market value of the subsidiary's assets.On December 31,2014,the two companies report the following data: \(\begin{array} { l }
\text { Parent Company Net Income for Past Year}& \text {\$ 100 million }\\
\text { Subsidiary Company Net Income for Past Year }& \text {\$ 50 million }\\ \end{array}\)
What is the consolidated net income for the year ended December 31,2014?
A) $100 million
B) $135 million
C) $145 million
D) $150 million
Q2) In an efficient capital market,searching for ________.
A) overpriced securities is fruitless
B) underpriced securities is fruitless
C) securities with high dividend yields is fruitless
D) low risk securities is fruitless
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