ACC 406 MANAGEMENT ACCOUNTING
COMPREHENSIVE EXAM | QUESTIONS
AND ANSWERS |2026/2027 UPDATE |
JUST RELEASED
1. Which of the following would be considered a product cost rather than a period cost under
absorption costing?
A. Sales commissions for the regional manager
B. Property taxes on the corporate headquarters
C. Advertising expenses for a new product line
D. Depreciation on factory equipment
Answer: D
Conceptual Explanation: Under absorption costing, all manufacturing costs, including
fixed and variable factory overhead like depreciation on factory equipment, are treated as
product costs. Non-manufacturing costs are period costs.
,2. Company X uses a process costing system. If the beginning work-in-process inventory was
2,000 units (60% complete), 10,000 units were started, and 9,000 units were completed, what
are the equivalent units for conversion costs using the weighted-average method if ending
inventory is 70% complete?
A. 9,700 units
B. 10,200 units
C. 11,100 units
D. 11,000 units
Answer: C
Conceptual Explanation: Equivalent units = units completed (9,000) + (Ending WIP units
* % complete). Ending WIP = 2,000 + 10,000 - 9,000 = 3,000 units. EU = 9,000 + (3,000 *
0.70) = 11,100.
3. Which of the following statements best describes the behavior of fixed costs per unit as
activity volume increases?
A. Fixed costs per unit remain constant regardless of activity level
B. Fixed costs per unit increase proportionally with volume
C. Fixed costs per unit vary randomly with volume changes
D. Fixed costs per unit decrease as activity volume increases
Answer: D
, Conceptual Explanation: Total fixed costs remain constant in the relevant range, meaning
that as volume increases, the fixed cost is spread over more units, resulting in a lower cost
per unit.
4. In a standard costing system, a favorable labor efficiency variance implies that:
A. The actual hourly rate paid was less than the standard rate
B. Actual hours worked were less than the standard hours allowed for actual production
C. The total actual labor cost was less than the total budget
D. Workers were more skilled than originally anticipated by the budget
Answer: B
Conceptual Explanation: Efficiency variance focuses on quantity. A favorable variance
means fewer hours were used than the standard allowed for the output achieved.
5. A company has a contribution margin ratio of 40%. If the break-even point in sales dollars
is $200,000, what are the total fixed costs?
A. $40,000
B. $120,000
C. $50,000
D. $80,000
Answer: D
COMPREHENSIVE EXAM | QUESTIONS
AND ANSWERS |2026/2027 UPDATE |
JUST RELEASED
1. Which of the following would be considered a product cost rather than a period cost under
absorption costing?
A. Sales commissions for the regional manager
B. Property taxes on the corporate headquarters
C. Advertising expenses for a new product line
D. Depreciation on factory equipment
Answer: D
Conceptual Explanation: Under absorption costing, all manufacturing costs, including
fixed and variable factory overhead like depreciation on factory equipment, are treated as
product costs. Non-manufacturing costs are period costs.
,2. Company X uses a process costing system. If the beginning work-in-process inventory was
2,000 units (60% complete), 10,000 units were started, and 9,000 units were completed, what
are the equivalent units for conversion costs using the weighted-average method if ending
inventory is 70% complete?
A. 9,700 units
B. 10,200 units
C. 11,100 units
D. 11,000 units
Answer: C
Conceptual Explanation: Equivalent units = units completed (9,000) + (Ending WIP units
* % complete). Ending WIP = 2,000 + 10,000 - 9,000 = 3,000 units. EU = 9,000 + (3,000 *
0.70) = 11,100.
3. Which of the following statements best describes the behavior of fixed costs per unit as
activity volume increases?
A. Fixed costs per unit remain constant regardless of activity level
B. Fixed costs per unit increase proportionally with volume
C. Fixed costs per unit vary randomly with volume changes
D. Fixed costs per unit decrease as activity volume increases
Answer: D
, Conceptual Explanation: Total fixed costs remain constant in the relevant range, meaning
that as volume increases, the fixed cost is spread over more units, resulting in a lower cost
per unit.
4. In a standard costing system, a favorable labor efficiency variance implies that:
A. The actual hourly rate paid was less than the standard rate
B. Actual hours worked were less than the standard hours allowed for actual production
C. The total actual labor cost was less than the total budget
D. Workers were more skilled than originally anticipated by the budget
Answer: B
Conceptual Explanation: Efficiency variance focuses on quantity. A favorable variance
means fewer hours were used than the standard allowed for the output achieved.
5. A company has a contribution margin ratio of 40%. If the break-even point in sales dollars
is $200,000, what are the total fixed costs?
A. $40,000
B. $120,000
C. $50,000
D. $80,000
Answer: D
