Financial Management & Budgeting Flashcards
7 cards from real COM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Management & Budgeting flashcards as text
Which of the following best describes a capital budget?
Answer: A plan for long-term investments in assets such as equipment and facilities
The capital budget focuses on planned investments in long-term assets and projects, typically spanning multiple years.
A company has fixed costs of $300,000, a selling price of $50 per unit, and variable costs of $20 per unit. What is the break-even point in units?
Answer: 10,000 units
Break-even = Fixed Costs / Contribution Margin = $300,000 / ($50 - $20) = 10,000 units.
An operations manager reviews a budget vs. actual report and finds a favorable materials price variance but an unfavorable materials usage variance. The most likely explanation is:
Answer: Lower-quality materials were purchased at a discount, leading to more waste
Cheaper materials often indicate lower quality, which causes more scrap and rework, explaining the unfavorable usage variance.
What does a high inventory turnover ratio generally indicate for an operations manager?
Answer: Inventory is being sold and replenished quickly and efficiently
High inventory turnover means the company converts inventory to sales rapidly, reducing holding costs and tying up less working capital.
When preparing a cash flow forecast, which item is added back to net income under the indirect method?
Answer: Depreciation expense
Depreciation is a non-cash expense that reduces net income but does not consume cash, so it is added back in the indirect method.
Which costing method is most appropriate for a manufacturer producing a single standardized product in a continuous flow process?
Answer: Process costing
Process costing accumulates costs over a continuous production process and averages them across all identical units produced.
An operations manager wants to reduce working capital requirements. Which action would directly achieve this?
Answer: Negotiating longer payment terms with suppliers
Longer supplier payment terms increase accounts payable, reducing the net working capital the company must finance.