Financial Management Practice Exam
Course Introduction
Financial Management is a core business course that explores the fundamental principles and practices of managing a firms financial resources. Topics covered include financial statement analysis, time value of money, risk and return, valuation of assets, capital budgeting, financing decisions, and working capital management. Emphasis is placed on strategic decision-making processes related to investment, financing, and dividend policies, equipping students with the analytical tools required to evaluate financial performance and maximize shareholder value in both domestic and international contexts.
Recommended Textbook
Horngrens Cost Accounting A Managerial Emphasis 3rd Australian Edition by Charles Horngren
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21 Chapters
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Page 2
Chapter 1: Management Accounting in Context
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Sample Questions
Q1) The last step in the five-step decision-making framework is "make and implement a decision."
A)True
B)False
Answer: False
Q2) Modern cost accounting plays a role in:
A)planning new products.
B)controlling costs.
C)evaluating operational processes.
D)All of these answers are correct.
Answer: D
Q3) Which statement refers best to management accounting information?
A)It primarily measures and records business transactions.
B)The audience tends to be shareholders,creditors,and tax authorities.
C)There are no regulations governing the reports.
D)The reports are generally delayed and historical.
Answer: C
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Chapter 2: Different Costs for Different Purposes
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324 Flashcards
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Sample Questions
Q1) Inventoriable costs and period costs flow through the income statement of a service company in a similar way to those of a manufacturing company.
A)True
B)False
Answer: False
Q2) ________ of a cost object are related to the particular cost object but cannot be traced to it in an economically feasible (cost-effective)way.
A)Direct costs
B)Accumulated costs
C)Indirect costs
D)Projected costs
Answer: C
Q3) When 50 000 units are produced the fixed cost is $10 per unit.Therefore,when 100 000 units are produced fixed costs will remain at $10 per unit.
A)True
B)False
Answer: False
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Chapter 3: Determining How Costs Behave
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Sample Questions
Q1) Machine-hours is a more economically plausible cost driver of machine maintenance than number of direct manufacturing labour-hours.
A)True
B)False
Answer: True
Q2) It is appropriate to incorporate expected learning-curve efficiencies when evaluating performance.
A)True
B)False
Answer: True
Q3) Multicollinearity exists in multiple regressions when two or more independent variables are highly correlated with each other.
A)True
B)False
Answer: True
Q4) Multicollinearity is NOT a concern in simple regression.
A)True
B)False
Answer: True
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Chapter 4: Costvolumeprofit Analysis
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Sample Questions
Q1) A 'revenue driver' is defined as:
A)any factor that affects revenues.
B)only factors that can influence a change in selling price.
C)any factor that affects costs and revenues.
D)only factors that can influence a change in demand.
Q2) Produce Company needs to know how many kilos of apples to have on hand each day.Each kilo of apples costs $0.50 and can be sold for $0.80.Unsold apples are worthless at the end of the day.The following demands were found after studying the last six months' sales:
200 kilos of apples 30% of the time
300 kilos of apples 40% of the time
400 kilos of apples 30% of the time
Required:
Determine whether Produce Company should order 200,300,or 400 kilos of apples.
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Chapter 5: Estimating the Cost of Producing Services
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Sample Questions
Q1) Irrespective of the costing system that a manager or management accountant might select,the _________ rate is calculated in the same way.
A)overhead
B)activity
C)cost-driver
D)hourly
Q2) A major difference between job costing and process costing is the extent of averaging used to calculate the unit costs of products or services.
A)True
B)False
Q3) Direct costs of a cost object are costs related to that cost object that managers and management accountants can trace to it in an economically feasible (cost-effective)way.
A)True
B)False
Q4) The actual cost-driver rate measures the budgeted capacity utilisation.
A)True
B)False
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Chapter 6: Estimating the Costs of Products and Inventory
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Sample Questions
Q1) The income under variable costing will always be the same as the income under absorption costing.
A)True
B)False
Q2) When using a normal costing system,manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.
A)actual;actual
B)budgeted;budgeted
C)actual;budgeted
D)budgeted;actual
Q3) The accounting (for a bakery)entry to record the transfer of rolls from the mixing department to the baking department is:
Work in Process-Mixing Department
Work in Process-Baking Department
A)True
B)False
Q4) Normal costing assigns indirect costs based on an actual indirect-cost rate.
A)True
B)False
Page 8
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Chapter 7: Target Costing, Managing Activities and Managing Capacity
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Sample Questions
Q1) The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on:
A)real available capacity.
B)normal capacity utilisation.
C)an unattainable level of capacity.
D)normal costing.
Q2) Life-cycle budgeting is particularly important when non-production costs are significant.
A)True
B)False
Q3) Long-run pricing decisions include:
A)adjusting product mix and output volume in a competitive market.
B)pricing a one-time-only special order.
C)pricing a product in a major market in which there is some leeway in setting price.
D)None of the above.
Q4) Costing systems recognise uncertainty the same way managers recognise it. A)True
B)False
Page 9
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Chapter 8: Activity-Based Management and Activity-Based Costing
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Sample Questions
Q1) Managers and workers do not use activity analysis,value engineering and activity-based costing information to achieve target costs.
A)True
B)False
Q2) Number of set-ups and number of components are identified as activity-cost drivers for overheads.Assuming an activity-based costing system is used,what is the total amount of overhead cost assigned to the standard model?
A)$48 000
B)$30 000
C)$29 000
D)$51 000
Q3) How much of the total costs will be assigned to Department B?
A)$80 000
B)$158 000
C)$228 000
D)$880 000
Q4) Costing systems with multiple cost pools are considered ABC systems. A)True
B)False
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Chapter 9: Pricing and Customer Profitability
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Sample Questions
Q1) Some managers and management accountants advocate fully allocating all costs to distribution channels and to customers because all costs are incurred to support the sales of products to customers.
A)True
B)False
Q2) All customers are equally important to a company and should receive equal levels of attention.
A)True
B)False
Q3) What is the target rate of return on investment for Botany Manufacturers?
A)12.9%
B)18.0%
C)14.8%
D)22.0%
Q4) Different categories of customers are willing to pay different prices for services depending on their circumstances.
A)True
B)False
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Chapter 10: Decision Making and Relevant Information
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Sample Questions
Q1) What is the change in operating profits if the one-time-only special order for 1000 units is accepted for $180 a unit by Welch?
A)$70 000 increase in operating profits
B)$75 000 decrease in operating profits
C)$10 000 decrease in operating profits
D)$10 000 increase in operating profits
Q2) Revenues and costs that are not relevant are said to be:
A)sunk.
B)qualitative.
C)quantitative.
D)irrelevant.
Q3) Relevant-cost analysis generally emphasises qualitative factors that can be expressed in financial terms.
A)True
B)False
Q4) The assumption of no short-run or strategic implications is crucial to management's analysis of the one-time-only special order decision.
A)True
B)False
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Chapter 11: Budgeting, Management Control and Responsibility Accounting
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Sample Questions
Q1) Discuss the importance of the sales forecast and items that influence its accuracy.
Q2) What is the amount budgeted for cost of goods sold in 2018?
A)$1 156 000
B)$2 400 000
C)$1 190 000
D)$986 000
Q3) What is budgeted cost of goods sold for 2019?
A)$345 600
B)$432 000
C)$480 000
D)$311 040
Q4) Cash collections for September are:
A)$102 000.
B)$86 700.
C)$99 500.
D)$71 500.
Q5) Activity-based budgeting and kaizen budgeting are really equivalent in meaning. A)True B)False
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Chapter 12: Flexible Budgets, Direct Cost Variances and Management Control
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Sample Questions
Q1) What is the market-size variance?
A)$1 260 000 F
B)$108 000 F
C)$360 000 U
D)$1 152 000 F
Q2) Employees logging into production floor terminals and other modern technologies greatly facilitate the use of a standard costing system.
A)True
B)False
Q3) Variances often affect each other.
A)True
B)False
Q4) A flexible budget is calculated at the start of the budget period.
A)True
B)False
Q5) What is the static-budget variance of variable costs?
A)$200 000 favourable
B)$250 000 unfavourable
C)$250 000 favourable
D)$50 000 unfavourable
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Chapter 13: Flexible Budgets, Overhead Cost Variances and Management Control
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Sample Questions
Q1) What can the fixed overhead cost variance be further subdivided into?
A)Flexible-budget variance and the production-volume variance
B)Price variance and the efficiency variance
C)Spending variance and flexible-budget variance
D)Production-volume variance and the efficiency variance
Q2) What is the budgeted variable overhead cost rate per output unit?
A)$120.00
B)$111.11
C)$175.00
D)$166.67
Q3) Explain why sales-volume variance could be helpful to managers.
Q4) Both financial and __________________ performance measures are used to evaluate the performance of managers.
A)non-financial
B)historic
C)estimated
D)activity-based
Q5) The production-volume variance arises only for fixed costs.
A)True
B)False
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Chapter 14: Allocation of Support-Department Costs,
Common Costs and Revenues
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Sample Questions
Q1) Why would businesses want to sell bundled products? What benefits,if any,are there for the consumer?
Q2) Using the direct method,what amount of Warehouse Department costs will be allocated to Department Books?
A)$90 000
B)$120 000
C)$70 000
D)$87 500
Q3) What is the name of the method that allocates costs in each cost pool using the same rate per unit?
A)Dual-rate cost-allocation method
B)Reciprocal cost-allocation method
C)Incremental cost-allocation method
D)Single-rate cost allocation method
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Chapter 15: Strategy Formation, Strategic Control and the Balanced Scorecard
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Sample Questions
Q1) Discretionary costs:
A)are physically observable activities.
B)possess a high level of certainty.
C)are usually large total amounts.
D)have detailed processes.
Q2) Strategic objectives that distinguish an organisation from its competitors,based on the organisation's strategy,are distinctive objectives.
A)True
B)False
Q3) Measures of the balanced scorecard's internal-business-process perspective include all of the following EXCEPT:
A)operating capabilities.
B)number of new customers.
C)number of new products.
D)defect rates.
Q4) Interactive control systems relate to strategic uncertainties and focus managers' attention and learning on key strategic issues.
A)True
B)False
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Chapter 16: Quality, Time and the Balanced Scorecard
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Sample Questions
Q1) Without ________________ quality measures,quality problems might not be identified until it is too late.
A)non-financial
B)throughput
C)financial
D)balanced
Q2) When using a control chart,when would a manager NOT investigate an activity? Variant question
A)Some observations are outside the preset range.
B)Almost all observations are within the range of two standard deviations.
C)All observations are outside the preset range.
D)All observations are within the range of preset standard deviations.
Q3) Three tools used to detect quality problems include control charts,Pareto charts and cause-and-effect diagrams.Briefly explain each of these tools.
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18
Chapter 17: Inventory Management, Just-In-Time and Simplified Costing Methods
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Sample Questions
Q1) Cool Enterprises has one particular product that has an annual demand of 1000 units.Total manufacturing costs per unit total $40 and setup costs per batch are $15.Direct material ordering costs for the product total $10 per order.Currently,the carrying costs per unit are 25% of manufacturing costs.
Required:
Determine the economic manufacturing order quantity.
Q2) In inventory management a trigger point refers to the inventory level at which a reorder is generated.
A)True
B)False
Q3) In managing inventories,the costs of preparing,issuing,and paying purchase orders,plus receiving and inspecting the items included in orders are known as:
A)carrying costs.
B)purchasing costs.
C)ordering costs.
D)stockout costs.
Q4) All inventory costs are recorded in the financial accounting system.
A)True
B)False
19
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Chapter 18: Capital Budgeting and Cost Analysis
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Sample Questions
Q1) Gold Coast Glass Company provides glassware machines for major department store retailers.The company has been investigating a new piece of machinery for its production department.The old equipment has a remaining life of five years and the new equipment has a value of $115 500 with a five-year life.The expected additional cash inflows are $35 000 per year.What is the payback period on this investment?
A)2.5 years
B)3 years
C)3.3 years
D)5 years
Q2) The net present value method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the hurdle rate.
A)True
B)False
Q3) In using the net present value (NPV)method for capital budgeting after-tax cash flows should be used instead of pre-tax cash flows when taxes are a consideration. A)True
B)False
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Page 20
Chapter 19: Management Control Systems, Transfer Pricing and
Multinational Considerations
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Sample Questions
Q1) The seller of Product A has no idle capacity and can sell all it can produce at $20 per unit.Outlay cost is $4.Assuming the seller can sell internally,what is the opportunity cost?
A)$4
B)$16
C)$20
D)$24
Q2) Market price is the only price a firm should use when transferring goods from one subunit to another subunit.
A)True
B)False
Q3) Goal congruence exists when individuals work toward achieving one goal,and groups work toward achieving a different goal.
A)True
B)False
Q4) Management control systems reflect only financial data.
A)True
B)False
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Chapter 20: Performance Measurement, Compensation
and Multinational Considerations
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Sample Questions
Q1) What were the sales for the Beta Division?
A)$4 333 333
B)$5 952 380
C)$6 500 000
D)$7 151 800
Q2) What were the sales for the Boat Division?
A)$7 200 000
B)$9 000 000
C)$11 750 000
D)$7 500 000
Q3) What is the value of the operating assets belonging to the Tractor Division?
A)$2 250 000
B)$1 750 000
C)$2 000 000
D)$2 500 000
Q4) Return on sales is calculated by dividing net profit by revenues.
A)True
B)False
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Chapter 21: Measuring and Reporting Sustainability
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Sample Questions
Q1) The term 'dynamic complexity' in sustainable decision-making refers to the way in which the factors in the decision change and respond to each other.
A)True
B)False
Q2) As the reporting required from businesses under an emissions trading scheme will be the responsibility of financial accountants,the work of management accountants will not be affected.
A)True
B)False
Q3) Traditional profits measures can measure sustainability;the information just has to be rearranged.
A)True
B)False
Q4) Australian companies must follow the ______________________________as their social and environmental reporting framework.
A)Standards for Environmental Management
B)Global Reporting Initiative
C)Australian Sustainability Index
D)These are not compulsory.
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