ACC 406 MANAGEMENT ACCOUNTING
FINAL EXAM | QUESTIONS AND
ANSWERS |2026/2027 UPDATE | JUST
RELEASED
1. A company has a contribution margin ratio of 40% and a margin of safety of 25%. If total
fixed costs are $120,000, what are the total actual sales?
A. $300,000
B. $500,000
C. $400,000
D. $200,000
Answer: C
Conceptual Explanation: Break-even sales = Fixed Costs / CM Ratio = $120,.40 =
$300,000. Margin of Safety % = (Actual Sales - Break-even Sales) / Actual Sales. 0.25 =
(Actual Sales - 300,000) / Actual Sales. 0.25 * Actual Sales = Actual Sales - 300,000. 0.75 *
Actual Sales = 300,000. Actual Sales = $400,000.
,2. Which of the following would be considered a relevant cost in a make-or-buy decision?
A. Unavoidable fixed overhead
B. Depreciation on existing machinery with no resale value
C. General corporate administrative costs
D. Opportunity cost of utilizing production space
Answer: D
Conceptual Explanation: Relevant costs are future costs that differ between alternatives.
Opportunity costs are always relevant because they represent benefits foregone. Sunk costs
like depreciation on old machinery and unavoidable overhead do not change between
decisions.
3. Under the Weighted-Average method of process costing, how are equivalent units
calculated for conversion costs?
A. Units started during the period plus units in beginning work in process
B. Units completed during the period plus equivalent units in ending work in process
C. Units completed during the period only
D. Units started and completed during the period plus equivalent units in ending work in
process
Answer: B
, Conceptual Explanation: Weighted-Average equivalent units = Units transferred out +
(Ending WIP units × % completion). It does not distinguish between units from beginning
inventory and units started during the period.
4. If the Variable Overhead Efficiency Variance is unfavorable, which of the following is the
most likely cause?
A. The actual price per unit of variable overhead was higher than standard
B. Production volume was lower than the denominator level used to set the rate
C. The utility company increased electricity rates unexpectedly
D. Actual direct labor hours worked exceeded the standard hours allowed for actual output
Answer: D
Conceptual Explanation: Variable overhead efficiency variance is driven by the efficiency
of the base (usually labor hours). If actual hours > standard hours allowed, the variance is
unfavorable.
5. Company X uses Activity-Based Costing. The total overhead is $500,000. 20% is related to
Setup (driven by number of setups) and 80% to Machining (driven by machine hours). Product
A uses 10 setups and 400 machine hours. Total setups are 100, and total machine hours are
5,000. What is the overhead cost for Product A?
A. $32,000
B. $50,000
C. $84,000
FINAL EXAM | QUESTIONS AND
ANSWERS |2026/2027 UPDATE | JUST
RELEASED
1. A company has a contribution margin ratio of 40% and a margin of safety of 25%. If total
fixed costs are $120,000, what are the total actual sales?
A. $300,000
B. $500,000
C. $400,000
D. $200,000
Answer: C
Conceptual Explanation: Break-even sales = Fixed Costs / CM Ratio = $120,.40 =
$300,000. Margin of Safety % = (Actual Sales - Break-even Sales) / Actual Sales. 0.25 =
(Actual Sales - 300,000) / Actual Sales. 0.25 * Actual Sales = Actual Sales - 300,000. 0.75 *
Actual Sales = 300,000. Actual Sales = $400,000.
,2. Which of the following would be considered a relevant cost in a make-or-buy decision?
A. Unavoidable fixed overhead
B. Depreciation on existing machinery with no resale value
C. General corporate administrative costs
D. Opportunity cost of utilizing production space
Answer: D
Conceptual Explanation: Relevant costs are future costs that differ between alternatives.
Opportunity costs are always relevant because they represent benefits foregone. Sunk costs
like depreciation on old machinery and unavoidable overhead do not change between
decisions.
3. Under the Weighted-Average method of process costing, how are equivalent units
calculated for conversion costs?
A. Units started during the period plus units in beginning work in process
B. Units completed during the period plus equivalent units in ending work in process
C. Units completed during the period only
D. Units started and completed during the period plus equivalent units in ending work in
process
Answer: B
, Conceptual Explanation: Weighted-Average equivalent units = Units transferred out +
(Ending WIP units × % completion). It does not distinguish between units from beginning
inventory and units started during the period.
4. If the Variable Overhead Efficiency Variance is unfavorable, which of the following is the
most likely cause?
A. The actual price per unit of variable overhead was higher than standard
B. Production volume was lower than the denominator level used to set the rate
C. The utility company increased electricity rates unexpectedly
D. Actual direct labor hours worked exceeded the standard hours allowed for actual output
Answer: D
Conceptual Explanation: Variable overhead efficiency variance is driven by the efficiency
of the base (usually labor hours). If actual hours > standard hours allowed, the variance is
unfavorable.
5. Company X uses Activity-Based Costing. The total overhead is $500,000. 20% is related to
Setup (driven by number of setups) and 80% to Machining (driven by machine hours). Product
A uses 10 setups and 400 machine hours. Total setups are 100, and total machine hours are
5,000. What is the overhead cost for Product A?
A. $32,000
B. $50,000
C. $84,000
