ACC 406 MANAGEMENT ACCOUNTING
COMPREHENSIVE FINAL EXAM |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Which of the following would cause a difference between the profit calculated under
absorption costing and variable costing?
A. Changes in the selling price per unit
B. The allocation of variable selling and administrative expenses
C. The use of a predetermined overhead rate
D. Changes in the level of inventory during the period
Answer: D
Conceptual Explanation: Absorption costing includes fixed manufacturing overhead in
product costs, whereas variable costing treats it as a period expense. When inventory levels
change, some fixed overhead is either deferred in or released from inventory under
absorption costing, causing profit to differ from variable costing.
,2. A company has a degree of operating leverage of 4. If sales increase by 10%, by what
percentage will net operating income increase?
A. 40%
B. 14%
C. 4%
D. 2.5%
Answer: A
Conceptual Explanation: Degree of Operating Leverage = % Change in Net Operating
Income / % Change in Sales. Therefore, % Change in Net Operating Income = 4 * 10% =
40%.
3. Under the high-low method, the variable cost per unit is calculated by:
A. Dividing the total cost at the high level by the high activity level
B. Dividing the difference in cost by the difference in activity
C. Subtracting the fixed cost from the total cost
D. Dividing the change in fixed cost by the change in variable cost
Answer: B
Conceptual Explanation: The high-low method estimates the variable cost per unit as the
change in cost divided by the change in activity between the high and low activity points.
, 4. A cost that remains constant in total but varies on a per-unit basis within the relevant
range is a:
A. Variable cost
B. Mixed cost
C. Fixed cost
D. Step-variable cost
Answer: C
Conceptual Explanation: Fixed costs do not change in total as activity levels change, but
the fixed cost per unit decreases as activity increases because the total is spread over more
units.
5. What is the impact on the break-even point if the variable cost per unit decreases while all
other factors remain constant?
A. The break-even point decreases
B. The break-even point increases
C. The break-even point remains unchanged
D. The contribution margin decreases
Answer: A
COMPREHENSIVE FINAL EXAM |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Which of the following would cause a difference between the profit calculated under
absorption costing and variable costing?
A. Changes in the selling price per unit
B. The allocation of variable selling and administrative expenses
C. The use of a predetermined overhead rate
D. Changes in the level of inventory during the period
Answer: D
Conceptual Explanation: Absorption costing includes fixed manufacturing overhead in
product costs, whereas variable costing treats it as a period expense. When inventory levels
change, some fixed overhead is either deferred in or released from inventory under
absorption costing, causing profit to differ from variable costing.
,2. A company has a degree of operating leverage of 4. If sales increase by 10%, by what
percentage will net operating income increase?
A. 40%
B. 14%
C. 4%
D. 2.5%
Answer: A
Conceptual Explanation: Degree of Operating Leverage = % Change in Net Operating
Income / % Change in Sales. Therefore, % Change in Net Operating Income = 4 * 10% =
40%.
3. Under the high-low method, the variable cost per unit is calculated by:
A. Dividing the total cost at the high level by the high activity level
B. Dividing the difference in cost by the difference in activity
C. Subtracting the fixed cost from the total cost
D. Dividing the change in fixed cost by the change in variable cost
Answer: B
Conceptual Explanation: The high-low method estimates the variable cost per unit as the
change in cost divided by the change in activity between the high and low activity points.
, 4. A cost that remains constant in total but varies on a per-unit basis within the relevant
range is a:
A. Variable cost
B. Mixed cost
C. Fixed cost
D. Step-variable cost
Answer: C
Conceptual Explanation: Fixed costs do not change in total as activity levels change, but
the fixed cost per unit decreases as activity increases because the total is spread over more
units.
5. What is the impact on the break-even point if the variable cost per unit decreases while all
other factors remain constant?
A. The break-even point decreases
B. The break-even point increases
C. The break-even point remains unchanged
D. The contribution margin decreases
Answer: A
