ACCT 201B EXAM 1 AND 2 PRACTICE
QUESTIONS FULLY SOLVED 2026-2027
EDITION.
Prime Cost - Answer Direct Materials + Direct Labor
Conversion Cost - Answer Direct Labor + Manufacturing Overhead
Product Cost - Answer Direct Materials + Direct Labor + Manufacturing Overhead
Period Cost - Answer Selling Expense + Admin Expense
Variable Manufacturing Cost - Answer Direct materials + Direct labor + Variable manufacturing
overhead
examples of manufacturing overhead - Answer indirect materials, indirect labor, depreciation
of manufacturing equipment, utility costs, property taxes, insurance premiums INCURRED TO
OPERATE A MANUFACTURING FACILITY
Examples of Selling Costs - Answer advertising, shipping, sales travel, sales commissions, sales
salaries, cost of finished goods warehouses
examples of administrative costs - Answer executive compensation, general accounting,
secretarial, PR
When are product costs expensed - Answer when the product is sold
when are period cost expensed - Answer in the period in which they are incurred
examples of variable costs - Answer cost of goods sold, direct materials, direct labor, variable
elements of mftg. overhead: indirect materials, supplies, power, variable elements of selling and
administrative expenses: commissions and shipping costs
examples of fixed costs - Answer mftg. overhead: depreciation, insurance, property taxes, rent,
supervisory salaries sg&a: administrative salaries, advertising, depreciation of
nonmanufacturing assets
, committed fixed costs - Answer organizational investments with a MULTIYEAR planning
horizon that cannot be significantly reduced even for short periods of time without making
fundamental changes; remain largely unchanged in the short term b/c the cost of restoring
them are likely to be far greater than any short run savings that might be realized
examples of committed fixed costs - Answer investments in facilities and equipment, real
estate taxes, insurances premiums
discretionary fixed costs - Answer arise from ANNUAL decisions made by management to
spend on certain fixed cost items; can be cut for short periods of time with minimal damage to
the long run goals of the organization
unit-level activities - Answer processing units on machines, processing units by hand,
consuming factory supplies
batch-level activties - Answer processing purchase orders, processing production orders,
setting up equipment, handling material
product-level activities - Answer testing new products, administering parts inventories,
designing products
facility-level activities - Answer general factory administration, plant building and grounds
A budget is most likely to be effective if - Answer it has top management support.
CVP analysis does not consider - Answer fixed cost per unit
What are the benefits of budgeting? - Answer -Facilitates the coordination of activities
-Provides definite objectives for evaluating performance
-Requires all levels of management to plan ahead on a recurring basis
Which of the following items does not follow from the adoption of a budget? - Answer
Guarantee of accomplishing the profit objective
A company has a unit contribution margin of $120 and a contribution margin ratio of 40%. What
is the unit selling price? - Answer
The contribution margin ratio increases when - Answer Variable costs as a percentage of sales
decrease
QUESTIONS FULLY SOLVED 2026-2027
EDITION.
Prime Cost - Answer Direct Materials + Direct Labor
Conversion Cost - Answer Direct Labor + Manufacturing Overhead
Product Cost - Answer Direct Materials + Direct Labor + Manufacturing Overhead
Period Cost - Answer Selling Expense + Admin Expense
Variable Manufacturing Cost - Answer Direct materials + Direct labor + Variable manufacturing
overhead
examples of manufacturing overhead - Answer indirect materials, indirect labor, depreciation
of manufacturing equipment, utility costs, property taxes, insurance premiums INCURRED TO
OPERATE A MANUFACTURING FACILITY
Examples of Selling Costs - Answer advertising, shipping, sales travel, sales commissions, sales
salaries, cost of finished goods warehouses
examples of administrative costs - Answer executive compensation, general accounting,
secretarial, PR
When are product costs expensed - Answer when the product is sold
when are period cost expensed - Answer in the period in which they are incurred
examples of variable costs - Answer cost of goods sold, direct materials, direct labor, variable
elements of mftg. overhead: indirect materials, supplies, power, variable elements of selling and
administrative expenses: commissions and shipping costs
examples of fixed costs - Answer mftg. overhead: depreciation, insurance, property taxes, rent,
supervisory salaries sg&a: administrative salaries, advertising, depreciation of
nonmanufacturing assets
, committed fixed costs - Answer organizational investments with a MULTIYEAR planning
horizon that cannot be significantly reduced even for short periods of time without making
fundamental changes; remain largely unchanged in the short term b/c the cost of restoring
them are likely to be far greater than any short run savings that might be realized
examples of committed fixed costs - Answer investments in facilities and equipment, real
estate taxes, insurances premiums
discretionary fixed costs - Answer arise from ANNUAL decisions made by management to
spend on certain fixed cost items; can be cut for short periods of time with minimal damage to
the long run goals of the organization
unit-level activities - Answer processing units on machines, processing units by hand,
consuming factory supplies
batch-level activties - Answer processing purchase orders, processing production orders,
setting up equipment, handling material
product-level activities - Answer testing new products, administering parts inventories,
designing products
facility-level activities - Answer general factory administration, plant building and grounds
A budget is most likely to be effective if - Answer it has top management support.
CVP analysis does not consider - Answer fixed cost per unit
What are the benefits of budgeting? - Answer -Facilitates the coordination of activities
-Provides definite objectives for evaluating performance
-Requires all levels of management to plan ahead on a recurring basis
Which of the following items does not follow from the adoption of a budget? - Answer
Guarantee of accomplishing the profit objective
A company has a unit contribution margin of $120 and a contribution margin ratio of 40%. What
is the unit selling price? - Answer
The contribution margin ratio increases when - Answer Variable costs as a percentage of sales
decrease
