Financial Decision Making
Midterm Exam
Course Introduction
Financial Decision Making explores the fundamental principles and analytical tools used to evaluate and guide personal, corporate, and public financial choices. The course covers topics such as capital budgeting, risk analysis, cost of capital, financial statement analysis, and the impact of market dynamics on decision-making. Students will learn to apply quantitative methods and ethical considerations to real-world financial scenarios, enabling them to assess investment opportunities, optimize resource allocation, and enhance value creation within organizations. Through case studies and practical exercises, the course equips learners with the skills necessary to make informed and strategic financial decisions in various professional contexts.
Recommended Textbook Cornerstones of Managerial Accounting 3rd Edition by Maryanne M. Mowen
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14 Chapters
2120 Verified Questions
2120 Flashcards
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Chapter 1: Introduction to Managerial Accounting
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) Which of the following currently exists as a professional accounting body in Canada?
A) CA Canada
B) CPA Canada
C) CGA Canada
D) CMA Canada
Answer: B
Q2) Which employee would normally occupy a staff position?
A) an assembly worker
B) the factory manager
C) the cost accounting manager
D) the vice president of operations
Answer: C
Q3) Positions that have direct responsibility for the basic objectives of an organization are normally referred to as staff positions.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Basic Managerial Accounting Concepts
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217 Verified Questions
217 Flashcards
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Sample Questions
Q1) Cost of lubricating production machinery
A)Product Cost, Direct Material
B)Product Cost, Direct Labour
C)Product Cost, Manufacturing Overhead
D)Product Cost, Selling Expense
E)Product Cost, Administrative Expense
F)Period Cost, Direct Material
G)Period Cost, Direct Labour
H)Period Cost, Manufacturing Overhead
I)Period Cost, Selling Expense
J)Period Cost, Administrative Expense
Answer: C
Q2) Number of units sold multiplied by sales price per unit
A)Gross Margin
B)Selling Expenses
C)Sales Revenue
D)Cost of Goods Sold
E)Operating Income
Answer: C
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Chapter 3: Cost Behaviour
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) Which of the following is the best example of a discretionary fixed cost?
A) executive travel costs
B) the cost of leasing machinery
C) licence fees for fleet of vehicles
D) depreciation on a factory building
Answer: A
Q2) Which of the following is the best example of a fixed cost in a fast-food restaurant?
A) monthly electric bill
B) shift manager's salary
C) cost of flour for pizza crust
D) cost of pepperoni for pizza topping
Answer: B
Q3) Using the least squares (regression) method, the term X Variable 1 refers to the dependent variable.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool
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154 Verified Questions
154 Flashcards
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Sample Questions
Q1) What is the purpose of doing a cost-volume-profit (CVP) analysis?
A) CVP analysis is effectively used by single-product firms only.
B) CVP analysis provides managers with information used for control only.
C) CVP analysis shows how revenues, expenses, and profits behave as volume changes.
D) CVP analysis allows managers to do sensitivity analysis by examining the impact of various prices or costs on volume.
Q2) The profit-volume graph shows the relationship between operating income and the number of units sold.
A)True
B)False
Q3) Refer to ePiano. How many practice models are sold at break-even?
A) 180
B) 220
C) 440
D) 1,320
Q4) Contribution margin ratio + variable cost ratio = 100%.
A)True
B)False
Q5) Explain why cost-volume-profit analysis can be useful to managers.
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Chapter 5: Job-Order Costing
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195 Verified Questions
195 Flashcards
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Sample Questions
Q1) When is the predetermined overhead rate usually calculated?
A) at the end of the year
B) at the end of each month
C) at the beginning of the year
D) at the beginning of each month
Q2) An approach that assigns the actual costs of direct materials and direct labour to products but uses a predetermined rate to assign overhead costs
A)Actual cost system
B)Job-order cost system
C)Normal cost system
D)Process-costing system
Q3) The Cost of Goods Sold appearing on the income statement as an expense is the normal Cost of Goods Sold.
A)True
B)False
Q4) There are other source documents besides the time ticket and the material requisition form used to fill out the job-order cost sheet.
A)True
B)False
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Chapter 6: Process Costing
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Which method combines partially completed units in beginning inventory with current period production when computing equivalent units of production?
A) actual cost method
B) FIFO costing method
C) LIFO costing method
D) weighted average costing method
Q2) Equivalent units of output are the complete units that could have been produced given the total amount of manufacturing effort expended for the period under consideration.
A)True
B)False
Q3) The usual approach is to treat transferred-in goods as a separate conversion category when calculating equivalent units.
A)True
B)False
Q4) Process costing is most appropriate for manufacturers of unique products.
A)True
B)False
Q5) Describe the differences between process costing and job-order costing.
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Chapter 7: Activity-Based Costing and Management
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) A volume-based costing system tends to be allocation-intensive.
A)True
B)False
Q2) Using the original design, a machine requires 24 hours of setup time. By redesigning the machine, the setup time is reduced by 35%. The cost per setup hour is $250. What is the new reduced non-value-added cost per setup?
A) $87.50 per setup
B) $2,000.00 per setup
C) $3,900.00 per setup
D) $6,000.00 per setup
Q3) Refer to CompInc. What is the manufacturing overhead cost per unit for each inexpensive laptop, when using manufacturing overhead rates that are based on machine hours and setup hours?
A) $10.00 per unit
B) $19.00 per unit
C) $20.00 per unit
D) $21.00 per unit
Q4) What is the activity based costing hierarchy? Give an example for each.
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Chapter 8: Absorption and Variable Costing, and Inventory Management
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) All other things being equal, if the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income.
A)True
B)False
Q2) Refer to Ella Company. What is the operating income using the variable costing method?
A) $6,800
B) $9,000
C) $9,800
D) $11,800
Q3) Refer to Theele Corporation. What is the June ending Finished Goods Inventory using the variable costing method?
A) $15,000
B) $116,000
C) $120,000
D) $260,000
Q4) Direct fixed expenses are avoidable if a segment is eliminated.
A)True B)False
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Chapter 9: Budgeting, Production, Cash, and Master Budget
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165 Verified Questions
165 Flashcards
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Sample Questions
Q1) What is a result of participative budgeting?
A) goal congruence
B) pseudoparticipation
C) slack built into the budget
D) set goals that are either too high or too low
Q2) Braham's Bottling Company sells fruit-flavoured colas. Estimated sales in cartons for September, October, and November are 1,000, 3,000, and 5,000, respectively. The selling price is forecast at $5 per carton. The company requires that ending finished goods inventory be 20% of the next month's sales. Finished goods inventory was 500 units on September 1. Each carton requires 12 mL of fruit syrup and 130 mL of carbonated water. Ending direct materials inventory is 10% of the next month's production needs. September
1 direct materials inventory met that requirement.
Required:
A. Calculate the budgeted revenue for September.
B. Calculate the budgeted revenue for November.
C. Calculate the production in September (in cartons).
D. Calculate the production in October (in cartons).
E. Calculate the purchases of syrup in September (in mL).
F. Calcualte the purchases of carbonated water in September (in mL).
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Chapter 10: Standard Costing: a Managerial Control Tool
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172 Verified Questions
172 Flashcards
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Sample Questions
Q1) Which statement best describes the material price variance?
A) It is the difference between the actual and standard unit price of an input multiplied by the number of inputs used.
B) It is the difference between the actual and standard unit price of an output multiplied by the number of inputs used.
C) It is the difference between the actual and standard unit price of an input multiplied by the number of inputs purchased.
D) It is the difference between the actual and standard unit price of an output multiplied by the number of inputs purchased.
Q2) Refer to AirSoar Company. What was the actual cost per labour hour?
A) $11.25
B) $11.50
C) $12.50
D) $12.75
Q3) The actual quantity of input at the standard price less the standard quantity of input at the actual price equals the usage variance.
A)True
B)False
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Chapter 11: Flexible Budgets and Overhead Analysis
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147 Verified Questions
147 Flashcards
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Sample Questions
Q1) During the year, Plasticine produced 10,000 units, used 21,000 direct labour hours, and incurred variable overhead of $100,000. Budgeted variable overhead for the year was $88,000. The hours allowed per unit are 2.1. The standard variable overhead rate is $4.10 per direct labour hour. What was the variable overhead spending variance?
A) $2,000 U
B) $2,900 F
C) $4,100 U
D) $13,900 U
Q2) Discuss why activity-based flexible budgeting provides a more accurate prediction of costs than a traditional flexible budget.
Q3) Which formula reflects the fixed overhead spending variance?
A) AFOH - BFOH
B) AFOH - (SFOR × SH)
C) BFOH - (SFOR × SH)
D) AFOH - (SFOR × AH)
Q4) Price changes of variable overhead items are easily controlled by production supervisors.
A)True
B)False
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Chapter 12: Performance Evaluation and Decentralization
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) The Glass Division of a company makes glass vases, which have the following unit costs: \[\begin{array} { l r }
\text { Direct materials } & \$ 0.20 \\
\text { Direct labour } & 0.35 \\
\text { Variable overhead } & 0.15 \\
\text { Fixed overhead } & 1.30 \\
\text { Selling commission } & 0.50
\end{array}\] The Florist Division of the company sells cut flowers and uses the glass vases. The Florist Division uses 10,000 vases per year and currently buys them from an outside supplier for $4 each. The Glass Division produces and sells 100,000 glass vases per year and sells them on the outside market for $4 each. Vases sold outside incur the sales commission; this commission would not be paid on internal transfers. The Glass Division and the Florist Division managers just met and agreed on a transfer price of $3.75 per vase. Is this a good idea for each division? Explain.
Q2) A manager assessing an investment using return on investment may make a different decision than had the manager assessed the Investment using residual income.
A)True
B)False
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Page 14
Chapter 13: Short-Run Decision Making: Relevant Costing
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) In deciding the optimal mix of products that use a constrained resource, it is important to determine the contribution margin per unit of scarce resource.
A)True
B)False
Q2) Limited resources and limited demand for each product
A)Differential cost
B)Keep-or-drop decision
C)Constraints
D)Decision-making model
E)Split-off point
F)Joint products
G)Make-or-buy decision
H)Target costing
I)Sunk costs
J)Markup
K)Special-order decision
L)Sell-or-process-further decision
M)Relevant costs
N)Opportunity cost
O)Cost-based pricing
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Page 15
Chapter 14: Capital Investment Decisions
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) The two major approaches to capital investment decision are nondiscounting models and discounting models.
A)True
B)False
Q2) Refer to Present Value Tables. Monsoon Company is considering an investment that will have an initial cost of $1,000,000 yield annual net cash inflows of $260,000. Yearly depreciation will be $200,000. The equipment is expected to be useful for five years, at which point it will be scrapped with no salvage value. The company requires a minimum rate of return of 10%.
Required:
A. Calculate the accounting rate of return.
B. Calculate the net present value. Is the investment acceptable?
C. Now suppose that the company believes it can sell the equipment at the end of five years for $100,000. Calculate the net present value. Is the investment acceptable?
D. What can you say about the IRR in the first case (no salvage value) versus the IRR in the second case ($100,000 salvage value)?
Q3) Which model of capital investment decision making is most widely used? Why?
Q4) What are the limitations of Accounting Rate of Return?
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Page 16