Managerial Finance
Final Exam Questions
Course Introduction
Managerial Finance focuses on the principles and techniques that managers use to make financial decisions in organizations. The course covers foundational topics such as financial analysis, planning and forecasting, capital budgeting, risk and return, cost of capital, and working capital management. Students learn how to interpret financial statements, assess investment opportunities, and develop strategies to maximize shareholder value. Emphasis is placed on real-world application of financial concepts through case studies and problem-solving exercises, equipping students with the analytical skills needed for effective financial decision-making in dynamic business environments.
Recommended Textbook
Managerial Accounting An Introduction to Concepts Methods and Uses 11th Edition by Michael W.
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Chapter 1: Fundamental Concepts
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Sample Questions
Q1) Who manages cash flows and raises cash for operations in most organizations?
A)Controller
B)Treasurer
C)Board of directors
D)Chief executive officer
Answer: B
Q2) Which of the following is true of Managerial Accounting?
A)Complies with Securities and Exchange Commission rules and regulations.
B)Uses cost-benefit analysis to determine the amount of detail presented.
C)Prepares general-purpose reports for people outside an organization.
D)Presents summary historical data in compliance with generally accepted accounting principles.
Answer: B
Q3) Ethical standards that comprise the Institute of Management Accountant's Code of Ethics do not include which of the following?
A)competence.
B)collegiality.
C)integrity.
D)objectivity.
Answer: B
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Chapter 2: Measuring Product Costs
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Q1) How does the Work-in-Process account both describe the transformation of inputs into outputs in a company and account for the costs incurred in the process?
Answer: A key factor in a company's success is how well it controls the conversion costs (direct labor and overhead).Companies closely monitor those costs in the Work-in-Process Inventory account.The key equation in words is Beginning Balance plus Transfers In equals Transfers Out plus Ending Balance.In symbols,we write BB + TI = TO + EB.
Q2) Computing equivalent units (Appendix 2.1).The Assembly Department had 80,000 units
65 percent complete in Work-in-Process Inventory at the beginning of April.During April,the department started and completed 150,000 units.The department started another 42,000 units and completed 25 percent as of the end of April.
Required: Compute the equivalent units of work performed during April using FIFO. Answer: (Computing equivalent units. )
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Chapter 3: Activity-Based Management
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Sample Questions
Q1) Identify the steps in activity based costing.
Answer: Activity-based costing requires accountants to follow four steps: (1)identify the activities that consume resources and assign costs to those activities, (2)identify the cost drivers associated with each activity, (3)compute a cost rate per cost driver unit,and (4)assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.The predetermined indirect cost rate is equal to the estimated indirect cost divided by the estimated volume of the allocation base.
Q2) Which of the following are not capacity-sustaining activities in the product cost hierarchy?
A)Plant management.
B)Building depreciation and rent.
C)Direct materials.
D)Heating and lighting.
Answer: C
Q3) What are the strategic and operational uses of activity-based management?
Answer: Activity-based management can help a company develop strategy,long-range plans,and subsequent cost advantage by focusing attention on activities.
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Page 5
Chapter 4: Strategic Management of Costs,quality,and Time
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Sample Questions
Q1) When referring to quality according to the customer,all of the following are typically important elements for service of a bridal gown except:
A)advertising costs
B)style
C)timeliness
D)fit
Q2) Which of the following statements is true?
A)As quality goes up,scrap and rework fall,raising costs.
B)As quality goes up,scrap and rework increase,reducing costs.
C)As quality goes up,scrap and rework fall,reducing costs.
D)As quality goes up,scrap and rework increase,increasing costs.
Q3) Traditional managerial accounting systems need to be modified to support total quality management by
A)reporting financial and nonfinancial information in more detail to aid in problem solving.
B)having line employees collect financial and nonfinancial information and use it to get timely feedback and solve problems.
C)basing rewards on quality and customer satisfaction measures of performance.
D)All of the answers are correct.
Page 6
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Chapter 5: Cost Drivers and Cost Behavior
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Q1) Analysts should take which step(s)in analyzing cost data?
A)Review alternative cost drivers.
B)Plot the data.
C)Examine the data and method of accumulation.
D)All of the answers are correct.
Q2) What does the learning curve function show?
A)The amount of time required to perform a task goes up per unit as the number of units increases.
B)The amount of time required to perform a task goes up per unit as the number of units decreases.
C)The amount of time required to perform a task goes down per unit as the number of units increases.
D)The amount of time required to perform a task goes down per unit as the number of units decreases.
Q3) Distinguish between variable costs and fixed costs,between short run and long run,and define the relevant range.
Q4) Explain the costs,benefits,and weaknesses of the various cost estimation methods.
Q5) Identify capacity costs,committed costs,and discretionary costs.
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Chapter 6: Financial Modeling for Short-Term Decision Making
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Sample Questions
Q1) What effect would an increase in fixed costs have on the break-even point and the contribution margin?
Break-even Point Contribution Margin
A)Increase Increase
B)Increase Decrease
C)Decrease Increase
D)Decrease Decrease
Q2) What is the formula for Break-Even Point in Sales Dollars?
A)Total Fixed Costs / Unit Contribution Margin.
B)(Total Fixed Costs + Target Profit)/ Unit Contribution Margin.
C)Sales Units - Break-Even Sales Units.
D)Total Fixed Costs / Contribution Margin Ratio.
Q3) What does sensitivity analysis refers to?
A)control.
B)what-if situations.
C)variable costs only.
D)fixed costs only.
Q4) How can financial modeling be used with multiple cost drivers?
Page 8
Q5) How can financial modeling be used for profit planning purposes?
Q6) Explain how to perform cost-volume-profit (CVP)analysis.
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Page 9
Chapter 7: Differential Cost Analysis for Operating Decisions
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Sample Questions
Q1) Using the theory of constraints,what is/are remedial action(s)that managers can take?
A)Eliminate idle time on the bottleneck operation.
B)Shift parts that do not have to be made on the bottleneck machine to non-bottleneck machines or to outside facilities.
C)Increase the capacity of the bottleneck process.
D)All of the answers are correct.
Q2) What stabilizes and improves processes to decrease variation,and is well suited to removing disruptions in the process?
A)Total Quality Management
B)Total Quantity Management
C)Total Price Management
D)Total Cost Management
Q3) The product life cycle lasts from
A)obtaining financing through paying off investors.
B)product design through product termination.
C)initial research and development through termination of customer support.
D)None of the answers is correct.
Q4) How is linear programming used to optimize the use of scarce resources?
Page 10
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Chapter 8: Capital Expenditure Decisions
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Sample Questions
Q1) Crown Corporation
Crown Corporation has agreed to sell some used computer equipment to Bob Parsons,one of the company's employees,for $5,000.
Refer to Crown Corporation.What would the present value of the note be if Parsons agreed to the immediate down payment of $1,000 but would like the note for $4,000 to be payable in full at the end of the fourth year? The increased risk associated with the terms of this note changes the discount rate to 8 percent.
Q2) If the net present value of a proposed project is positive,then the actual rate of return
A)is higher than the cost of capital.
B)is lower than the cost of capital.
C)is equal to the cost of capital.
D)is negative.
Q3) What does the term capital budgetingmean in the context of making capital expenditure decisions?
A)the process of choosing assets.
B)the process of allocating the funds among assets.
C)the process of acquiring the funds to finance the business.
D)None of the above.
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Chapter 9: Profit Planning and Budgeting
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Q1) Sales volume variance analysis.Crank Company prepared a budget last period with budgeted sales of 56,000 units at a price of $70 each.Variable costs were budgeted to be $10 per unit.Fixed costs were budgeted to be $2,100,000 for the period.During the period,actual sales totaled 60,000 units.
Required:
Prepare a variance report to show the difference between the master budget and the flexible budget.
(Crank Company;sales volume variance analysis. )
Q2) Able Company
Able Company expects to begin the coming year with 12,000 units of product X in the inventory of finished goods.It expects to sell 130,000 units of the product and end the year with 15,800 units in finished goods inventory.Five pounds of material A go into each unit of product X.The company expects to have 2,000 pounds of material A on hand at the beginning of the coming year and wished to end the year with 3,400 pounds in inventory.
Refer to Able Company.Calculate the number of pounds of material A the company must purchase during the year.
Q3) Describe the master budget.
Q4) Describe a comprehensive master budget.
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Chapter 10: Profit and Cost Center Performance Evaluation
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Q1) When multiple inputs are used to produce the output,the efficiency variance can be broken down into which of the following?
A)mix and match variances.
B)mix and yield variances.
C)profit and yield variances.
D)benefit and match variances.
Q2) To help managers in their efforts to control overhead costs,managers and accountants analyze overhead variances using the variable cost variance model by separating variable overhead variances into
A)price and quality components.
B)economy and efficiency components.
C)price and efficiency components.
D)economy and effectiveness components.
Q3) Activity-based costing raises numerous specific questions that managers can address to improve which of the following?
A)Productivity and quality.
B)Price and efficiency.
C)Efficiency only.
D)Productivity only.
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Chapter 11: Investment Center Performance Evaluation
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Q1) When measuring a division's operating costs,thecost of the company president's salary is
A)direct,controllable.
B)indirect,controllable.
C)direct,noncontrollable.
D)indirect,noncontrollable.
Q2) Transfer pricing systems based on costs include which of the following?
A)activity-based costing.
B)cost-plus.
C)standard costs.
D)All of the answers are correct.
Q3) Which statement is true concerning a dual transfer pricing system?
A)It provides the selling division with a profit but charges the buying division with costs.
B)It provides the buying division with a profit but charges the selling division with costs.
C)It is required by generally accepted accounting principles.
D)None of the answers is correct.
Q4) What issues must be addressed when using return on investment (ROI)as a divisional performance measure?
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Chapter 12: Incentive Issues
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Q1) Which of the following is not a control that can be instituted to prevent financial fraud?
A)Separate duties
B)Encourage collusion
C)Internal audits
D)Independent audits
Q2) Rewards that come from outside the individual,such as rewards from a teacher,a parent,an organization,or a spouse that include grades,money,praise,and prizes are called
A)traditional rewards.
B)intrinsic rewards.
C)extrinsic rewards.
D)outside rewards.
Q3) Economists argue that corruption requires the following element(s):
A)An individual,such as a government official,must have discretionary power to award a contract or rights.
B)There must be economic benefits associated with the discretionary power to award a contract or rights.
C)The legal system must be unlikely to detect wrongdoing.
D)All of the answers are correct.
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Chapter 13: Allocating Costs to Responsibility Centers
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Q1) Net realizable value and physical measures are two methods for allocating which of the following costs?
A)direct costs.
B)opportunity costs.
C)joint-process costs.
D)sunk costs.
Q2) Jamar Company has two production departments,Tubing and Packing,and two service departments,Quality Control and Maintenance.In June,the Quality Control department provided 2,000 hours of service- 1,047 hours to Tubing,255 hours to Maintenance,and 698 hours to Packing.In the same month,Maintenance provided 2,750 hours to Tubing,1,900 hours to Packing,and 350 hours to Quality Control.Quality Control incurred costs of $100,000,and Maintenance incurred costs of $210,000.
Required:
Use the step method to allocate service department costs sequentially based on hours of service provided.Start with Maintenance and then allocate Quality Control.Check your solution by making certain that the firm finally allocates $310,000 to the production departments.
Q3) How is activity-based costing used to allocate service department costs?
Q4) Why are service department costs allocated to producing departments?
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