Chapter 1 - What Every Nonprofit Manager Should Know About Accounting and Finance
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1.
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“Different costs for different purposes” is a central idea of management accounting and financial management, which allows for flexibility in meeting internal user needs. T F 22
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2.
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Funding options available to nonprofit organizations include pooled bond issue and private bond offerings. T F 15
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3.
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All of the following statements are correct EXCEPT 22
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  Costs may be indirect and variable.
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Costs may be direct and variable.
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Costs may not be indirect and fixed.
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Costs may be direct and fixed.
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4.
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Sunk costs cannot be relevant to 23
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Choosing from alternative actions.
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Predicting costs.
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Analyzing cost behavior.
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Determining past or historical costs.
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5.
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Fixed costs that are never relevant to decisions include 23
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Future costs.
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Past costs.
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Both of the above.
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None of the above.
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Chapter 2 - Accounting Basics for Nonprofits
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6.
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Expenses must be reported in which class of net assets? 27
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Temporarily restricted.
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Permanently restricted.
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Unrestricted.
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Equity.
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7.
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Restricted grants should initially be recorded as 36
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Revenue.
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Deferred revenue.
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Disclosure only.
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Stockholders' equity.
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8.
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Contractual obligations are called 41
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Expenditures.
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Budgets.
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Encumbrances.
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Transfers.
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9.
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Nonprofits can recognize unconditional pledges as assets when made even though the actual cash is still not received. T F 38
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10.
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Most larger NPOs use which basis of accounting? 32
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Cash.
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Accrual.
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Modified accrual.
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Tax.
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11.
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Revenue must be spent consistent with regulations, limitations, or restrictions. T F 33
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12.
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A statement of cash flows is to be presented in general-purpose external financial statements by which of the following? 35
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Publicly held business enterprises only.
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Privately held business enterprises only.
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All business enterprises.
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All business enterprises and not-for-profit organizations.
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13.
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According to SFAS 116, Accounting for Contributions Received and Contributions Made, what classification(s), if any, should be used by not-for-profit organizations to report receipts of contributions? 37
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Neither Unrestricted Support nor Restricted Support
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Restricted Support but not Unrestricted Support
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Unrestricted Support but not Restricted Support
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Both Unrestricted Support and Restricted Support
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14.
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Which of the following nongovernmental not-for-profit organizations must report information about expenses by natural classification? 34
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Voluntary health and welfare organizations (VHWOs).
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Private hospitals.
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Colleges and universities.
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Other not-for-profit organizations.
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Chapter 3 - Cost-Volume-Revenue Analysis: Are We Breaking Even?
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15.
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Revenue minus variable costs is called 51
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Opportunity revenue.
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Gross margin.
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Contribution margin.
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Safety margin.
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16.
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Cost-volume-revenue (CVR) is used to analyze 48
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The behavior of some costs and revenues as changes in units of service occur.
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The behavior of total costs, total revenues, and surplus as changes in units of service occur.
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A single revenue driver and multiple cost drivers in special case cvr.
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Multiple revenue drivers and a single cost driver in special case cvr.
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17.
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Some nonprofit entities may have only fixed source of revenue, typically a government budget appropriation. In this case, the break-even formula becomes 58
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(Fixed revenue - Fixed costs)/Unit variable cost,
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(Fixed costs - Fixed revenue)/ Unit CM,
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(Expected level Break even level)/Expected level,
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Fixed costs/Unit CM,
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Chapter 4 - Financial Analysis and Metrics: Avoiding Bankruptcy
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18.
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The average accounting age of equipment may be computed as 68
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Accumulated depreciation divided by depreciation expense.
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Depreciation expense divided by total assets.
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Accumulated depreciation divided by total assets.
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Depreciation expense divided by book value.
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19.
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Measures of performance (or metrics) for a college include number of courses and ratio of faculty to students. T F 72
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20.
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In analyzing the Statement of Activities for NPOs, determine: 70
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Whether the NPO is self-sustaining and operating well.
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If service efforts are being successful.
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Whether management has discharged its stewardship responsibilities.
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All of the above.
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Chapter 5 - Forecasting: Revenues, Costs, and Cash Flows
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21.
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Cash flow forecasting can serve a number of goals, including 92
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Avoidance of financial distress or bankruptcy.
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Escape from costly mistakes such as ill-conceived ventures.
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Aid in cash management and control.
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All of the above.
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22.
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The table t value, based on a degree of freedom and a level of significance, is used 110
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To set the prediction range -- upper and lower limits -- for the predicted value of the dependent variable.
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As a cutoff value for the t-test.
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Both of the above.
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None of the above.
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23.
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In exponential smoothing, the optimal smoothing constant a may be picked by minimizing the 101
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Mean squared error (MSE).
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Standard deviation.
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Coefficient of determination.
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Moving average.
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24.
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Multiple regressions involve 110
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One independent variable.
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Two independent variables.
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More than one independent variable.
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More than one dependent variable.
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25.
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Which one of the following is a qualitative forecasting technique? 93
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Simple regression.
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Moving average.
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Trend analysis.
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Delphi method.
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26.
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The equation(s) required for applying the least-squares method could be expressed as 102
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SUMy = na + bSUMx SUMy = na + bSUMx.
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y = a + bx2.
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SUMxy = aSUMx + bSUMx2.
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SUMy = na + bSUMx. SUMxy = aSUMx + bSUMx2.
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Chapter 6 - The Budgeting Process: Device for Planning and Control
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27.
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A childcare center can care for 50 children. The expected number of students is 70%. The center operates 48 weeks a year. It is open 40 hours a week. The hourly rate is $5. The budgeted gross revenue is 130
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$258,000.00
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$310,000.00
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$336,000.00
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$4l0, 000.
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28.
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The journal entry for a purchase order is to 142
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Debit expenditures.
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Debit encumbrances.
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Debit reserve for encumbrances.
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Debit cash.
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29.
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Which type of budget relates the inputs of resources to the output of services? 123
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Performance budget.
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Line item budget.
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Incremental budget.
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Zero base budget.
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30.
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The line item budget lists the sources of revenue and categories of expenses (object accounts). T F 124
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31.
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Which type of budget starts fresh each year and all activities (new and old) must be justified? 125
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Zero-base budget.
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Performance budget.
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Incremental budget.
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Program budget.
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32.
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Which budget lists and describes planned capital acquisitions and improvements? 126
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Zero base.
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Incremental.
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Performance.
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Capital.
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Chapter 7 - Zero-Base Budgeting and Program Budgeting
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33.
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Zero base budgeting requires managers to justify each budget line item. T F 147
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34.
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ZBB is a continual process. Each manager must justify his budget request in detail from a zero base. T F 148
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35.
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Programs may be considered either direct or support. T F 154
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36.
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Under program budgeting, a project should be broken down by major activity or task, and then further segregated into subactivities. T F 154
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Chapter 8 - Cost Behavior, Cost Control, and Flexible Budgeting
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37.
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Determine the material quantity variance using actual production of 100 units of output, 3 pieces allowed per unit, actual price of $2 per piece, and standard price of $3 per piece. Assume the company used 240 pieces of material. 170
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$120.00
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$180.00
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$60.00
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$100.00
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38.
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The cost-volume formula would be expressed as 158
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y = a + bSUMx.
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y = ax + b.
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y = ax.
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y = a + bx.
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39.
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An understanding of cost behavior is helpful 158
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For break even and cost volume revenue analysis.
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For pricing of services and products.
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Establishing bid prices on contracts and proposals.
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All of the above.
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40.
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Marie Welfare Agency incurred a total cost of $8,600 to provide 40 units of service. Each unit of service required 5 direct labor hours to complete. What are the total fixed costs if the variable cost was $15 per direct labor-hour? 161
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1,700.00
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2,600.00
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4,100.00
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5,600.00
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41.
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Unfavorable labor efficiency variances may be explained by poor supervision, poor quality workers, poor quality of materials requiring more labor time, and employee unrest. T F 170
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Chapter 9 - Enhancing Managerial and Department Performance
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42.
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The contribution approach is one method under which center concept? 178
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Mission.
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Investment.
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Cost.
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Service.
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43.
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Output indicators or control surrogates of welfare and rehabilitation agencies include 179
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Percent of successful treatment.
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Better child care.
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Rate of recidivism.
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All of the above.
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44.
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Responsibility centers of nonprofit organizations can be viewed as either mission centers or service centers. T F 174
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45.
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Allocated general fixed costs 179
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Can make a program appear to be financially viable when it may not be.
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Are always incremental costs.
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Are always relevant in decisions involving dropping of a program or project.
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None of the above.
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Chapter 10 - Obtaining Funds: Short-Term and Long-Term Financing
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46.
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The opportunity cost associated with failing to pay a vendor on terms of 2/10, net/30 is 184
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25.3%.
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10.8%.
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41%.
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36.7%.
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47.
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An NPO has received donations in 20X5 of $250,000 and in 20X4 of $280,000. The estimated amount of donation for 20X6 based on a simple average is. 187
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$390,000.00
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$245,000.00
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$280,000.00
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$265,000.00
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48.
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A telephone bill is an example of a 188
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Fixed cost.
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Variable cost.
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Semi-variable cost.
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Sunk cost.
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49.
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An NPO borrows $500,000 for one year at a 10% interest rate. There is a 5% compensating balance. The interest and compensating balance are deducted at the time of the loan to arrive at the loan proceeds. The effective interest rate is 198
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Chapter 11 - Managing Working Capital and Investing Surplus Funds
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50.
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Short-term notes issued by the U.S government are called 224
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Warrant.
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Commercial paper.
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Treasury bill.
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Bond.
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51.
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Factors to be considered in investment decisions for nonprofit financial managers are 221-222
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Safety of principal.
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Stability of income.
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Maturity.
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All of the above.
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52.
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Financial securities cover a broad range of investment instruments, excluding 222
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Stocks, common and preferred.
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Real estate.
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Bonds.
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Options.
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53.
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Which one of the following is a cash management model? 212-214
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Baumol's model.
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Miller Orr model.
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Both of the above.
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None of the above.
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54.
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The agency should not take advantage of a cash discount offered for early payment because failing to do so results in a low opportunity cost. T F 215
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55.
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With leveraged derivatives, when you win, you win big. But when you lose, you lose big. T F 228
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Chapter 12 - Cost Management and Pricing Decisions
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56.
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Allocating the service center costs to the mission centers may be accomplished by one of the following procedures 231
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The high-low method .
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Step-down (two-stage) method .
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Activity-based costing.
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None of the above.
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57.
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Benefits from an ABC system are numerous from the standpoint of planning, control, and decision-making. They include 243
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Improved product or service cost data.
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Cost reduction by eliminating the activities that do not add value.
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Both of the above.
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None of the above.
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58.
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A proper cost driver for employee insurance would be 245
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Square footage of space.
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Pound of supplies.
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Direct labor dollars.
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Number of claims filed.
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59.
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In an effort to enhance product or service costing accuracy, activity-based costing (ABC) uses a larger number of cost drivers than the one or two volume-based cost drivers typical in a conventional system. T F 240
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60.
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Allocation of support department costs to the mission departments is necessary to 231
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Control costs.
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Determine prices for service rendered.
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Maximize efficiency.
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Measure use of plant capacity.
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61.
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The step-down method of support department cost allocation often begins with allocation of the costs of the support department that 233
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Provides the greatest percentage of its support to the mission departments.
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Provides the greatest percentage of its support to other support departments.
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Provides the greatest total output of support.
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Has the highest total costs among the support departments.
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Chapter 13 - Analysis for Short-Term and capital expenditure decisions and Financial Modeling
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62.
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An initial investment of $20,000 generates annual benefits of $8,000. The payback period is 254
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63.
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The make or buy decision must be investigated, along with the broader perspective of considering how best to utilize available facilities. The alternatives are 248
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Leaving facilities idle.
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Outsourcing and renting out idle facilities .
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Outsourcing and using idle facilities for other services.
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All of the above.
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64.
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An agency can either purchase a mini-computer for $61,000 or lease it at an annual $13,000 payment and own it after five years. The anticipated discount rate will be 8 percent. The present value of $13,000 a year for five years at 8% is 253
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51,909.00
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61,000.00
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9,901.00
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None of the above.
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65.
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Applications and uses of financial models include 263
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Risk analysis.
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ôWhat-ifö analysis.
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Both of the above.
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None of the above.
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66.
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In a make or buy decision 248
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Only the variable costs are relevant.
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Both the variable costs and the fixed costs which will continue regardless of the decision are relevant.
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Both the variable costs and the fixed costs which are avoidable are relevant.
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None of the above.
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67.
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One of the popular financial modeling software used by hospitals is HOFPLAN. T F 268
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68.
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The present worth of future sums of money is 253
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Future value.
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Present value.
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Past value.
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Limited value.
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69.
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A method of evaluating investment projects does not include 255
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Payback period.
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External index.
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Internal rate of return (IRR).
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Net present value (NPV).
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70.
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An annuity is a series of payments of a fixed amount for 254
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A specified number of periods.
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For one-time period.
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For an indeterminable period.
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For an unspecified number of periods.
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