ACC 406 MANAGEMENT ACCOUNTING -
TEST 3 COMPREHENSIVE EXAM |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. The direct materials price variance is calculated as (AP - SP) x AQ. If the actual price (AP) is
$5.50, the standard price (SP) is $5.00, and the actual quantity purchased (AQ) is 10,000 units,
what is the variance?
A. $5,000 Favorable
B. $500 Unfavorable
C. $5,000 Unfavorable
D. $500 Favorable
Answer: C
Conceptual Explanation: The variance is (5.50 - 5.00) * 10,000 = $5,000. Since the actual
price is higher than the standard price, it is unfavorable (U).
,2. In a flexible budget, what happens to the total variable costs as the level of activity
increases?
A. Total variable costs remain constant.
B. Total variable costs decrease per unit.
C. Total variable costs increase in direct proportion to activity.
D. Total variable costs decrease in total.
Answer: C
Conceptual Explanation: By definition, total variable costs change in direct proportion to
changes in the activity level, while variable cost per unit remains constant.
3. Which of the following is most likely responsible for a direct labor efficiency variance?
A. The Purchasing Manager
B. The Personnel Manager
C. The Chief Financial Officer
D. The Production Supervisor
Answer: D
Conceptual Explanation: The Production Supervisor is responsible for how efficiently
labor is used on the shop floor. The Personnel manager might be responsible for the rate,
but efficiency is a production issue.
, 4. A segment of a business is a candidate for elimination if:
A. Its contribution margin is positive.
B. It has common fixed costs allocated to it.
C. Its sales are decreasing.
D. Its segment margin is negative.
Answer: D
Conceptual Explanation: A segment should be eliminated if its segment margin
(Contribution Margin minus Traceable Fixed Costs) is negative, assuming those traceable
costs can be avoided.
5. Company A has a Net Operating Income of $50,000, Average Operating Assets of $250,000,
and Sales of $500,000. What is the Return on Investment (ROI)?
A. 10%
B. 25%
C. 50%
D. 20%
Answer: D
Conceptual Explanation: ROI = Net Operating Income / Average Operating Assets.
$50,000 / $250,000 = 0.20 or 20%.
TEST 3 COMPREHENSIVE EXAM |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. The direct materials price variance is calculated as (AP - SP) x AQ. If the actual price (AP) is
$5.50, the standard price (SP) is $5.00, and the actual quantity purchased (AQ) is 10,000 units,
what is the variance?
A. $5,000 Favorable
B. $500 Unfavorable
C. $5,000 Unfavorable
D. $500 Favorable
Answer: C
Conceptual Explanation: The variance is (5.50 - 5.00) * 10,000 = $5,000. Since the actual
price is higher than the standard price, it is unfavorable (U).
,2. In a flexible budget, what happens to the total variable costs as the level of activity
increases?
A. Total variable costs remain constant.
B. Total variable costs decrease per unit.
C. Total variable costs increase in direct proportion to activity.
D. Total variable costs decrease in total.
Answer: C
Conceptual Explanation: By definition, total variable costs change in direct proportion to
changes in the activity level, while variable cost per unit remains constant.
3. Which of the following is most likely responsible for a direct labor efficiency variance?
A. The Purchasing Manager
B. The Personnel Manager
C. The Chief Financial Officer
D. The Production Supervisor
Answer: D
Conceptual Explanation: The Production Supervisor is responsible for how efficiently
labor is used on the shop floor. The Personnel manager might be responsible for the rate,
but efficiency is a production issue.
, 4. A segment of a business is a candidate for elimination if:
A. Its contribution margin is positive.
B. It has common fixed costs allocated to it.
C. Its sales are decreasing.
D. Its segment margin is negative.
Answer: D
Conceptual Explanation: A segment should be eliminated if its segment margin
(Contribution Margin minus Traceable Fixed Costs) is negative, assuming those traceable
costs can be avoided.
5. Company A has a Net Operating Income of $50,000, Average Operating Assets of $250,000,
and Sales of $500,000. What is the Return on Investment (ROI)?
A. 10%
B. 25%
C. 50%
D. 20%
Answer: D
Conceptual Explanation: ROI = Net Operating Income / Average Operating Assets.
$50,000 / $250,000 = 0.20 or 20%.
