ACC 406 TEST 2: MANAGERIAL
ACCOUNTING COMPREHENSIVE EXAM
| QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Which of the following would decrease the break-even point in units, assuming all other
variables remain constant?
A. An increase in total fixed costs
B. A decrease in the selling price per unit
C. An increase in the variable cost per unit
D. An increase in the unit contribution margin
Answer: D
Conceptual Explanation: The break-even point in units is calculated as Fixed Costs
divided by Unit Contribution Margin. If the Unit Contribution Margin increases, the
denominator increases, resulting in a lower break-even point.
,2. Company A has a degree of operating leverage of 4. If sales increase by 15%, by what
percentage will net operating income increase?
A. 4%
B. 15%
C. 3.75%
D. 60%
Answer: D
Conceptual Explanation: Percentage change in net operating income = Degree of
operating leverage x Percentage change in sales. 4 x 15% = 60%.
3. In a production budget, how is the required production in units calculated?
A. Budgeted sales + Beginning inventory - Desired ending inventory
B. Beginning inventory + Budgeted sales + Desired ending inventory
C. Budgeted sales - Desired ending inventory - Beginning inventory
D. Budgeted sales + Desired ending inventory - Beginning inventory
Answer: D
Conceptual Explanation: To meet sales needs and target inventory levels, you add the
desired ending inventory to sales and subtract the stock already on hand (beginning
inventory).
, 4. Which cost is always considered irrelevant in decision-making?
A. Opportunity costs
B. Avoidable fixed costs
C. Sunk costs
D. Incremental costs
Answer: C
Conceptual Explanation: Sunk costs are costs that have already been incurred and cannot
be changed by any future decision, making them irrelevant to future choices.
5. A favorable direct materials price variance indicates that:
A. Less material was used than the standard allowed
B. The actual price paid for materials was less than the standard price
C. Production efficiency has increased
D. Actual production was higher than budgeted production
Answer: B
Conceptual Explanation: The price variance focuses strictly on the difference between
actual price and standard price paid for inputs.
6. The Direct Labor Efficiency Variance is most likely the responsibility of which manager?
A. Purchasing Manager
ACCOUNTING COMPREHENSIVE EXAM
| QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Which of the following would decrease the break-even point in units, assuming all other
variables remain constant?
A. An increase in total fixed costs
B. A decrease in the selling price per unit
C. An increase in the variable cost per unit
D. An increase in the unit contribution margin
Answer: D
Conceptual Explanation: The break-even point in units is calculated as Fixed Costs
divided by Unit Contribution Margin. If the Unit Contribution Margin increases, the
denominator increases, resulting in a lower break-even point.
,2. Company A has a degree of operating leverage of 4. If sales increase by 15%, by what
percentage will net operating income increase?
A. 4%
B. 15%
C. 3.75%
D. 60%
Answer: D
Conceptual Explanation: Percentage change in net operating income = Degree of
operating leverage x Percentage change in sales. 4 x 15% = 60%.
3. In a production budget, how is the required production in units calculated?
A. Budgeted sales + Beginning inventory - Desired ending inventory
B. Beginning inventory + Budgeted sales + Desired ending inventory
C. Budgeted sales - Desired ending inventory - Beginning inventory
D. Budgeted sales + Desired ending inventory - Beginning inventory
Answer: D
Conceptual Explanation: To meet sales needs and target inventory levels, you add the
desired ending inventory to sales and subtract the stock already on hand (beginning
inventory).
, 4. Which cost is always considered irrelevant in decision-making?
A. Opportunity costs
B. Avoidable fixed costs
C. Sunk costs
D. Incremental costs
Answer: C
Conceptual Explanation: Sunk costs are costs that have already been incurred and cannot
be changed by any future decision, making them irrelevant to future choices.
5. A favorable direct materials price variance indicates that:
A. Less material was used than the standard allowed
B. The actual price paid for materials was less than the standard price
C. Production efficiency has increased
D. Actual production was higher than budgeted production
Answer: B
Conceptual Explanation: The price variance focuses strictly on the difference between
actual price and standard price paid for inputs.
6. The Direct Labor Efficiency Variance is most likely the responsibility of which manager?
A. Purchasing Manager
