ACC 406 MANAGEMENT ACCOUNTING
ADVANCED EXAM | QUESTIONS AND
ANSWERS |2026/2027 UPDATE | JUST
RELEASED
1. A company has a contribution margin ratio of 40%. If fixed costs are $120,000 and the
target net operating income is $60,000, what is the required sales revenue?
A. $300,000
B. $200,000
C. $180,000
D. $450,000
Answer: D
Conceptual Explanation: Required sales = (Fixed Costs + Target Profit) / CM Ratio =
($120,000 + $60,000) / 0.40 = $450,000.
2. Under variable costing, which of the following costs are treated as period costs?
A. Only variable manufacturing costs
B. Direct materials and direct labor
,C. Fixed manufacturing overhead and variable selling expenses
D. Fixed manufacturing overhead and all selling and administrative expenses
Answer: D
Conceptual Explanation: Variable costing treats all fixed manufacturing overhead and all
selling/administrative costs as period costs.
3. Company X uses a weighted-average process costing system. In Department A, 2,000 units
were in beginning work in process (60% complete), 10,000 units were started, and 3,000 units
were in ending work in process (40% complete). What are the equivalent units for conversion
costs?
A. 10,800 units
B. 9,000 units
C. 12,000 units
D. 10,200 units
Answer: D
Conceptual Explanation: Completed units = 2,000 + 10,000 - 3,000 = 9,000. Equivalent
units = 9,000 + (3,000 * 40%) = 10,200.
4. If the degree of operating leverage is 4.0 and sales increase by 15%, the net operating
income will increase by:
A. 4%
, B. 60%
C. 15%
D. 30%
Answer: B
Conceptual Explanation: % Change in NOI = Degree of Operating Leverage * % Change in
Sales = 4.0 * 15% = 60%.
5. Which variance is most likely the responsibility of the purchasing manager?
A. Materials price variance
B. Materials quantity variance
C. Labor efficiency variance
D. Variable overhead rate variance
Answer: A
Conceptual Explanation: The purchasing manager is typically responsible for the price
paid for raw materials.
6. In a make-or-buy decision, which of the following is NOT relevant?
A. Unavoidable fixed overhead costs
B. Variable overhead costs
C. Direct labor costs
ADVANCED EXAM | QUESTIONS AND
ANSWERS |2026/2027 UPDATE | JUST
RELEASED
1. A company has a contribution margin ratio of 40%. If fixed costs are $120,000 and the
target net operating income is $60,000, what is the required sales revenue?
A. $300,000
B. $200,000
C. $180,000
D. $450,000
Answer: D
Conceptual Explanation: Required sales = (Fixed Costs + Target Profit) / CM Ratio =
($120,000 + $60,000) / 0.40 = $450,000.
2. Under variable costing, which of the following costs are treated as period costs?
A. Only variable manufacturing costs
B. Direct materials and direct labor
,C. Fixed manufacturing overhead and variable selling expenses
D. Fixed manufacturing overhead and all selling and administrative expenses
Answer: D
Conceptual Explanation: Variable costing treats all fixed manufacturing overhead and all
selling/administrative costs as period costs.
3. Company X uses a weighted-average process costing system. In Department A, 2,000 units
were in beginning work in process (60% complete), 10,000 units were started, and 3,000 units
were in ending work in process (40% complete). What are the equivalent units for conversion
costs?
A. 10,800 units
B. 9,000 units
C. 12,000 units
D. 10,200 units
Answer: D
Conceptual Explanation: Completed units = 2,000 + 10,000 - 3,000 = 9,000. Equivalent
units = 9,000 + (3,000 * 40%) = 10,200.
4. If the degree of operating leverage is 4.0 and sales increase by 15%, the net operating
income will increase by:
A. 4%
, B. 60%
C. 15%
D. 30%
Answer: B
Conceptual Explanation: % Change in NOI = Degree of Operating Leverage * % Change in
Sales = 4.0 * 15% = 60%.
5. Which variance is most likely the responsibility of the purchasing manager?
A. Materials price variance
B. Materials quantity variance
C. Labor efficiency variance
D. Variable overhead rate variance
Answer: A
Conceptual Explanation: The purchasing manager is typically responsible for the price
paid for raw materials.
6. In a make-or-buy decision, which of the following is NOT relevant?
A. Unavoidable fixed overhead costs
B. Variable overhead costs
C. Direct labor costs
