UF ACCOUNTING COMPETENCY EXAM – MANAGERIAL
2026 WITH 100% ACCURATE ANSWERS
1. Describe the significance of an inventory purchases budget in the
context of overall financial planning for a company.
It is only relevant for companies with large inventories.
It helps a company manage its cash flow and ensures that it has
sufficient inventory to meet customer demand.
It eliminates the need for sales forecasting.
It solely focuses on reducing production costs.
2. Describe the impact of the difference in costs between variable and
absorption costing on financial statements.
The difference in costs has no impact on financial statements.
The difference in costs affects the reported income, requiring
adjustments to reconcile the two methods.
The difference in costs only affects cash flow, not income.
The difference in costs is irrelevant for decision-making.
3. If a company incurs a salary expense for a production manager, how
would this cost be classified?
Fixed cost
Direct cost
Indirect cost
Variable cost
4. Discrepancies between absorption and variable costing income:
Are common because of production and sales differ over the
, course of a week, month or year
All the above
Occur because of the changes in inventory levels
Will over the course of a decade, be approximately equal
5. If a company has a standard hourly labor rate of $20, an actual hourly
rate of $22, and 100 hours worked, what is the labor rate variance?
$300 favorable
$200 favorable
$200 unfavorable
$300 unfavorable
6. Which of the following should always be ignored in making decisions?
opportunity costs
qualitative factors
avoidable costs
sunk costs
7. What is the definition of differential cost?
Cost that is the same for all alternatives
Future cost that differs between any two alternatives
Total cost incurred for a specific period
Cost that remains constant regardless of the decision
8. What components are included in the cost of goods sold?
Overhead and utilities only
, Only materials and labor
Labor and equipment depreciation only
Materials, labor, overhead, utilities, and equipment
depreciation
9. What does an inventory purchases budget typically outline?
The fixed and variable costs associated with production
What a company plans to buy and how much inventory it
intends to hold over a period
The total sales revenue expected for the year
The projected cash flow for the next quarter
10. Describe how multiple predetermined overhead rates can enhance the
accuracy of job costing.
Multiple predetermined overhead rates increase total overhead
costs for each job.
Multiple predetermined overhead rates simplify the job costing
process by using a single rate.
Multiple predetermined overhead rates allow for more precise
allocation of overhead costs based on different activities or
departments.
Multiple predetermined overhead rates are used only for large
manufacturing companies.
11. What does the materials quantity variance measure?
The total cost of materials used in production.
The difference between actual production costs and budgeted
production costs.
, The total amount of materials purchased during the period.
The difference between the actual quantity of material used
and the standard quantity allowed.
12. If a company finds that its materials quantity variance is significantly
unfavorable, what steps might it take to address this issue?
Increase production levels to spread fixed costs over more
units.
Increase the selling price of the finished goods to cover costs.
Reduce the standard price of materials to improve variance.
Investigate the reasons for excess material usage and
implement better inventory management practices.
13. Describe the significance of the cost of units completed in the context
of inventory management.
It shows the profit margin on sold goods.
It reflects the total overhead costs allocated to production.
It indicates the total expenses related to raw materials only.
It represents the total cost incurred for units that are finished
and ready for sale.
14. Describe the significance of direct labor in the context of product
costing.
Direct labor includes all labor costs regardless of traceability.
Direct labor is only relevant for service industries.
Direct labor is less important than overhead costs in product
costing.
Direct labor is significant because it represents the labor costs
2026 WITH 100% ACCURATE ANSWERS
1. Describe the significance of an inventory purchases budget in the
context of overall financial planning for a company.
It is only relevant for companies with large inventories.
It helps a company manage its cash flow and ensures that it has
sufficient inventory to meet customer demand.
It eliminates the need for sales forecasting.
It solely focuses on reducing production costs.
2. Describe the impact of the difference in costs between variable and
absorption costing on financial statements.
The difference in costs has no impact on financial statements.
The difference in costs affects the reported income, requiring
adjustments to reconcile the two methods.
The difference in costs only affects cash flow, not income.
The difference in costs is irrelevant for decision-making.
3. If a company incurs a salary expense for a production manager, how
would this cost be classified?
Fixed cost
Direct cost
Indirect cost
Variable cost
4. Discrepancies between absorption and variable costing income:
Are common because of production and sales differ over the
, course of a week, month or year
All the above
Occur because of the changes in inventory levels
Will over the course of a decade, be approximately equal
5. If a company has a standard hourly labor rate of $20, an actual hourly
rate of $22, and 100 hours worked, what is the labor rate variance?
$300 favorable
$200 favorable
$200 unfavorable
$300 unfavorable
6. Which of the following should always be ignored in making decisions?
opportunity costs
qualitative factors
avoidable costs
sunk costs
7. What is the definition of differential cost?
Cost that is the same for all alternatives
Future cost that differs between any two alternatives
Total cost incurred for a specific period
Cost that remains constant regardless of the decision
8. What components are included in the cost of goods sold?
Overhead and utilities only
, Only materials and labor
Labor and equipment depreciation only
Materials, labor, overhead, utilities, and equipment
depreciation
9. What does an inventory purchases budget typically outline?
The fixed and variable costs associated with production
What a company plans to buy and how much inventory it
intends to hold over a period
The total sales revenue expected for the year
The projected cash flow for the next quarter
10. Describe how multiple predetermined overhead rates can enhance the
accuracy of job costing.
Multiple predetermined overhead rates increase total overhead
costs for each job.
Multiple predetermined overhead rates simplify the job costing
process by using a single rate.
Multiple predetermined overhead rates allow for more precise
allocation of overhead costs based on different activities or
departments.
Multiple predetermined overhead rates are used only for large
manufacturing companies.
11. What does the materials quantity variance measure?
The total cost of materials used in production.
The difference between actual production costs and budgeted
production costs.
, The total amount of materials purchased during the period.
The difference between the actual quantity of material used
and the standard quantity allowed.
12. If a company finds that its materials quantity variance is significantly
unfavorable, what steps might it take to address this issue?
Increase production levels to spread fixed costs over more
units.
Increase the selling price of the finished goods to cover costs.
Reduce the standard price of materials to improve variance.
Investigate the reasons for excess material usage and
implement better inventory management practices.
13. Describe the significance of the cost of units completed in the context
of inventory management.
It shows the profit margin on sold goods.
It reflects the total overhead costs allocated to production.
It indicates the total expenses related to raw materials only.
It represents the total cost incurred for units that are finished
and ready for sale.
14. Describe the significance of direct labor in the context of product
costing.
Direct labor includes all labor costs regardless of traceability.
Direct labor is only relevant for service industries.
Direct labor is less important than overhead costs in product
costing.
Direct labor is significant because it represents the labor costs
