ACC 406 FINAL EXAM
COMPREHENSIVE REVIEW |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Under absorption costing, how are fixed manufacturing overhead costs treated?
A. They are treated as period costs and expensed in the period incurred.
B. They are excluded from the product cost calculation.
C. They are treated as product costs and capitalized in inventory.
D. They are treated as variable expenses based on units sold.
Answer: C
Conceptual Explanation: Absorption costing includes all manufacturing costs (direct
materials, direct labor, variable overhead, and fixed overhead) in the cost of a product.
2. Which of the following would cause the break-even point to decrease, assuming all other
factors remain constant?
A. An increase in total fixed costs.
B. A decrease in the unit contribution margin.
,C. An increase in the selling price per unit.
D. An increase in the variable cost per unit.
Answer: C
Conceptual Explanation: An increase in selling price increases the contribution margin
per unit, which reduces the number of units needed to cover fixed costs.
3. When comparing variable costing and absorption costing, if production exceeds sales,
which statement is true?
A. Net income under absorption costing will be higher than under variable costing.
B. Net income under variable costing will be higher than under absorption costing.
C. Net income will be the same under both methods.
D. Fixed manufacturing overhead is expensed immediately under absorption costing.
Answer: A
Conceptual Explanation: When production exceeds sales, some fixed manufacturing
overhead is deferred in inventory under absorption costing, leading to a higher net income
compared to variable costing.
4. Which variance is most likely the responsibility of the purchasing manager?
A. Labor Efficiency Variance
B. Variable Overhead Efficiency Variance
C. Materials Price Variance
, D. Materials Quantity Variance
Answer: C
Conceptual Explanation: The purchasing manager is generally responsible for the price
paid for raw materials, represented by the Materials Price Variance.
5. In a make-or-buy decision, which of the following is considered a relevant cost?
A. Depreciation on existing specialized machinery with no resale value.
B. Sunk costs incurred in the previous year.
C. General factory overhead allocated to the product.
D. Avoidable fixed costs if the part is purchased.
Answer: D
Conceptual Explanation: Relevant costs are future costs that differ between alternatives.
Avoidable fixed costs change depending on whether the company makes or buys the part.
6. The ‘Margin of Safety’ is defined as:
A. The difference between total sales and total variable costs.
B. The ratio of fixed costs to the contribution margin ratio.
C. The excess of budgeted or actual sales dollars over the break-even sales dollars.
D. The amount by which net income exceeds the target profit.
Answer: C
COMPREHENSIVE REVIEW |
QUESTIONS AND ANSWERS |2026/2027
UPDATE | JUST RELEASED
1. Under absorption costing, how are fixed manufacturing overhead costs treated?
A. They are treated as period costs and expensed in the period incurred.
B. They are excluded from the product cost calculation.
C. They are treated as product costs and capitalized in inventory.
D. They are treated as variable expenses based on units sold.
Answer: C
Conceptual Explanation: Absorption costing includes all manufacturing costs (direct
materials, direct labor, variable overhead, and fixed overhead) in the cost of a product.
2. Which of the following would cause the break-even point to decrease, assuming all other
factors remain constant?
A. An increase in total fixed costs.
B. A decrease in the unit contribution margin.
,C. An increase in the selling price per unit.
D. An increase in the variable cost per unit.
Answer: C
Conceptual Explanation: An increase in selling price increases the contribution margin
per unit, which reduces the number of units needed to cover fixed costs.
3. When comparing variable costing and absorption costing, if production exceeds sales,
which statement is true?
A. Net income under absorption costing will be higher than under variable costing.
B. Net income under variable costing will be higher than under absorption costing.
C. Net income will be the same under both methods.
D. Fixed manufacturing overhead is expensed immediately under absorption costing.
Answer: A
Conceptual Explanation: When production exceeds sales, some fixed manufacturing
overhead is deferred in inventory under absorption costing, leading to a higher net income
compared to variable costing.
4. Which variance is most likely the responsibility of the purchasing manager?
A. Labor Efficiency Variance
B. Variable Overhead Efficiency Variance
C. Materials Price Variance
, D. Materials Quantity Variance
Answer: C
Conceptual Explanation: The purchasing manager is generally responsible for the price
paid for raw materials, represented by the Materials Price Variance.
5. In a make-or-buy decision, which of the following is considered a relevant cost?
A. Depreciation on existing specialized machinery with no resale value.
B. Sunk costs incurred in the previous year.
C. General factory overhead allocated to the product.
D. Avoidable fixed costs if the part is purchased.
Answer: D
Conceptual Explanation: Relevant costs are future costs that differ between alternatives.
Avoidable fixed costs change depending on whether the company makes or buys the part.
6. The ‘Margin of Safety’ is defined as:
A. The difference between total sales and total variable costs.
B. The ratio of fixed costs to the contribution margin ratio.
C. The excess of budgeted or actual sales dollars over the break-even sales dollars.
D. The amount by which net income exceeds the target profit.
Answer: C
