ACC 406 FINAL EXAM
COMPREHENSIVE STUDY GUIDE |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Which of the following would be considered a period cost rather than a product cost under
GAAP?
A. Property taxes on the corporate headquarters
B. Depreciation on factory equipment
C. Wages for factory assembly line workers
D. Lubricants used in the production process
Answer: A
Conceptual Explanation: Period costs are non-manufacturing costs that are expensed in
the period incurred, such as administrative and selling expenses. Property taxes on
corporate headquarters fall into this category, whereas factory-related costs are product
costs.
,2. In a job-order costing system, what is the journal entry to record the application of
manufacturing overhead to work in process?
A. Debit Work in Process, Credit Manufacturing Overhead
B. Debit Manufacturing Overhead, Credit Cash
C. Debit Manufacturing Overhead, Credit Work in Process
D. Debit Finished Goods, Credit Manufacturing Overhead
Answer: A
Conceptual Explanation: Manufacturing overhead is applied to jobs by debiting the Work
in Process (WIP) inventory account and crediting the Manufacturing Overhead account.
3. A company uses a predetermined overhead rate based on machine hours. If the actual
overhead is $100,000 and the applied overhead is $95,000, which of the following is true?
A. Overhead is overapplied by $5,000
B. Overhead is underapplied by $5,000
C. Cost of Goods Sold will be decreased by $5,000
D. Work in Process is overstated by $5,000
Answer: B
Conceptual Explanation: When actual overhead ($100,000) exceeds applied overhead
($95,000), overhead is underapplied. This usually results in an increase to Cost of Goods
Sold when closed out.
, 4. Using the weighted-average method in process costing, how are equivalent units
calculated?
A. Units started during the period plus equivalent units in beginning inventory
B. Units completed during the period plus equivalent units in ending inventory
C. Units completed minus units in beginning inventory
D. Equivalent units in ending inventory minus units started
Answer: B
Conceptual Explanation: The weighted-average method combines units completed
(regardless of when started) with the equivalent units in the ending work in process
inventory.
5. Which of the following costs is most likely to be classified as a mixed cost?
A. Direct materials
B. Utility bills containing a fixed monthly charge plus a usage fee
C. Factory rent
D. Sales commissions based solely on a percentage of revenue
Answer: B
Conceptual Explanation: Mixed costs contain both a fixed component (the base charge)
and a variable component (the usage fee).
COMPREHENSIVE STUDY GUIDE |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Which of the following would be considered a period cost rather than a product cost under
GAAP?
A. Property taxes on the corporate headquarters
B. Depreciation on factory equipment
C. Wages for factory assembly line workers
D. Lubricants used in the production process
Answer: A
Conceptual Explanation: Period costs are non-manufacturing costs that are expensed in
the period incurred, such as administrative and selling expenses. Property taxes on
corporate headquarters fall into this category, whereas factory-related costs are product
costs.
,2. In a job-order costing system, what is the journal entry to record the application of
manufacturing overhead to work in process?
A. Debit Work in Process, Credit Manufacturing Overhead
B. Debit Manufacturing Overhead, Credit Cash
C. Debit Manufacturing Overhead, Credit Work in Process
D. Debit Finished Goods, Credit Manufacturing Overhead
Answer: A
Conceptual Explanation: Manufacturing overhead is applied to jobs by debiting the Work
in Process (WIP) inventory account and crediting the Manufacturing Overhead account.
3. A company uses a predetermined overhead rate based on machine hours. If the actual
overhead is $100,000 and the applied overhead is $95,000, which of the following is true?
A. Overhead is overapplied by $5,000
B. Overhead is underapplied by $5,000
C. Cost of Goods Sold will be decreased by $5,000
D. Work in Process is overstated by $5,000
Answer: B
Conceptual Explanation: When actual overhead ($100,000) exceeds applied overhead
($95,000), overhead is underapplied. This usually results in an increase to Cost of Goods
Sold when closed out.
, 4. Using the weighted-average method in process costing, how are equivalent units
calculated?
A. Units started during the period plus equivalent units in beginning inventory
B. Units completed during the period plus equivalent units in ending inventory
C. Units completed minus units in beginning inventory
D. Equivalent units in ending inventory minus units started
Answer: B
Conceptual Explanation: The weighted-average method combines units completed
(regardless of when started) with the equivalent units in the ending work in process
inventory.
5. Which of the following costs is most likely to be classified as a mixed cost?
A. Direct materials
B. Utility bills containing a fixed monthly charge plus a usage fee
C. Factory rent
D. Sales commissions based solely on a percentage of revenue
Answer: B
Conceptual Explanation: Mixed costs contain both a fixed component (the base charge)
and a variable component (the usage fee).
