ACCT_MGR: Managerial Accounting (17th Edition) –
Garrison Noreen Brewer – Ultimate Midterm & Final
Exam Prep with Detailed Rationales
Course Code: ACCT_MGR
Course Name: Managerial Accounting (17th Edition) – Garrison Noreen
Brewer – Ultimate Midterm & Final Exam Prep
Topic: Cost Classifications, Job-Order Costing, Process Costing, and Cost-
Volume-Profit (CVP) Analysis
Academic Year: 2026/2027
1. A manufacturing firm utilizes a job-order costing system and applies
manufacturing overhead to jobs using a predetermined overhead rate
based on direct labor-hours. At the beginning of the current fiscal period, the
company estimated total manufacturing overhead costs at $240,000 and total
direct labor-hours at 50,000 hours. The actual manufacturing overhead
incurred during the period was $252,000, and the actual direct labor-hours
worked were 52,000 hours. The accountant reviews the financial
transactions to determine the exact closing adjustment for the overhead
account. Which of the following statements correctly identifies the status of
the manufacturing overhead account at year-end before adjustment?
,A. Manufacturing overhead is overapplied by $2,400
B. Manufacturing overhead is underapplied by $2,400
C. Manufacturing overhead is overapplied by $12,000
D. Manufacturing overhead is underapplied by $12,000
CORRECT ANSWER: Manufacturing overhead is overapplied by $2,400
RATIONALE: Step 1: Calculate the Predetermined Overhead Rate
Use the standard formula dividing estimated overhead costs by the estimated
allocation base:
• Formula:
Predetermined Overhead Rate = Estimated Total Manufacturing Overhead
Costs / Estimated Total Amount of the Allocation Base
• Calculation:
Predetermined Overhead Rate = $240,,000 direct labor-hours =
$4.80 per direct labor-hour
Step 2: Determine the Applied Manufacturing Overhead
Multiply the predetermined rate by the actual direct labor-hours worked during
the period:
• Formula:
Applied Overhead = Predetermined Overhead Rate × Actual Direct Labor-
Hours Worked
• Calculation:
Applied Overhead = $4.80 × 52,000 actual hours = $249,600
Step 3: Evaluate Applied Overhead against Actual Incurred Overhead
Compare the overhead applied to production against the actual overhead costs
tracking the final account status:
• Formula:
Overhead Status Variance = Actual Overhead Incurred - Applied Overhead
• Calculation:
Overhead Status Variance = $252,000 (Actual) - $249,600 (Applied) =
$2,400
,Final Conclusion
Because the applied overhead ($249,600) is less than the actual overhead costs
incurred ($252,000), the manufacturing overhead account is underapplied
by $2,400.
CORRECT ANSWER: Manufacturing overhead is underapplied by
$2,400 (Choice B).
2. Apex Corporation manufactures a single high-performance mechanical
valve. The company's planning metrics reveal a selling price of $150 per
unit, variable expenses of $90 per unit, and total static fixed expenses of
$180,000 per year. The corporate director requests a structural breakeven
matrix to evaluate risk tolerance parameters for the upcoming product cycle.
What is the exact breakeven point in total sales dollars for Apex
Corporation?
A. $300,000
B. $450,000
C. $270,000
D. $180,000
CORRECT ANSWER: $450,000
RATIONALE: Step 1: Calculate the Contribution Margin (CM) Ratio
First, determine the profitability ratio after subtracting variable expenses from
the selling price:
• Formula:
CM Ratio = (Selling Price - Variable Expenses) / Selling Price
• Calculation:
CM Ratio = ($150 - $90) / $150 = $60 / $150 = 0.40 (or 40%)
Step 2: Calculate the Breakeven Point in Sales Dollars
Next, divide the total fixed expenses by the CM ratio to find the total revenue
needed to cover all costs:
, • Formula:
Breakeven Sales Dollars = Total Fixed Expenses / CM Ratio
• Calculation:
Breakeven Sales Dollars = $180,.40 = $450,000
Final Conclusion
The exact revenue needed to break even is $450,000.
• Correct Selection: Choice B
(Note: Choice A is an incorrect distractor. It represents the breakeven point in
units [3,000 units] multiplied by the variable cost instead of the selling
price).
3. Under a variable costing system, which of the following production costs is
treated explicitly as a period cost rather than a product cost on financial
reports?
A. Direct materials utilized in assembly line operations
B. Variable manufacturing overhead costs
C. Fixed manufacturing overhead costs
D. Direct labor costs tracked via operational routing codes
CORRECT ANSWER: Fixed manufacturing overhead costs
RATIONALE: Under variable costing, only variable production costs
(direct materials, direct labor, and variable manufacturing overhead) are
capitalized as product costs inside inventory accounts. Fixed
manufacturing overhead costs are treated entirely as period costs and are
expensed in full on the income statement in the period incurred, identical to
selling and administrative expenses. In contrast, absorption costing treats
fixed manufacturing overhead as a product cost, attaching it directly to units
of inventory. Choices A, B, and D are variable production components and
remain product costs under both variable and absorption costing models.
Garrison Noreen Brewer – Ultimate Midterm & Final
Exam Prep with Detailed Rationales
Course Code: ACCT_MGR
Course Name: Managerial Accounting (17th Edition) – Garrison Noreen
Brewer – Ultimate Midterm & Final Exam Prep
Topic: Cost Classifications, Job-Order Costing, Process Costing, and Cost-
Volume-Profit (CVP) Analysis
Academic Year: 2026/2027
1. A manufacturing firm utilizes a job-order costing system and applies
manufacturing overhead to jobs using a predetermined overhead rate
based on direct labor-hours. At the beginning of the current fiscal period, the
company estimated total manufacturing overhead costs at $240,000 and total
direct labor-hours at 50,000 hours. The actual manufacturing overhead
incurred during the period was $252,000, and the actual direct labor-hours
worked were 52,000 hours. The accountant reviews the financial
transactions to determine the exact closing adjustment for the overhead
account. Which of the following statements correctly identifies the status of
the manufacturing overhead account at year-end before adjustment?
,A. Manufacturing overhead is overapplied by $2,400
B. Manufacturing overhead is underapplied by $2,400
C. Manufacturing overhead is overapplied by $12,000
D. Manufacturing overhead is underapplied by $12,000
CORRECT ANSWER: Manufacturing overhead is overapplied by $2,400
RATIONALE: Step 1: Calculate the Predetermined Overhead Rate
Use the standard formula dividing estimated overhead costs by the estimated
allocation base:
• Formula:
Predetermined Overhead Rate = Estimated Total Manufacturing Overhead
Costs / Estimated Total Amount of the Allocation Base
• Calculation:
Predetermined Overhead Rate = $240,,000 direct labor-hours =
$4.80 per direct labor-hour
Step 2: Determine the Applied Manufacturing Overhead
Multiply the predetermined rate by the actual direct labor-hours worked during
the period:
• Formula:
Applied Overhead = Predetermined Overhead Rate × Actual Direct Labor-
Hours Worked
• Calculation:
Applied Overhead = $4.80 × 52,000 actual hours = $249,600
Step 3: Evaluate Applied Overhead against Actual Incurred Overhead
Compare the overhead applied to production against the actual overhead costs
tracking the final account status:
• Formula:
Overhead Status Variance = Actual Overhead Incurred - Applied Overhead
• Calculation:
Overhead Status Variance = $252,000 (Actual) - $249,600 (Applied) =
$2,400
,Final Conclusion
Because the applied overhead ($249,600) is less than the actual overhead costs
incurred ($252,000), the manufacturing overhead account is underapplied
by $2,400.
CORRECT ANSWER: Manufacturing overhead is underapplied by
$2,400 (Choice B).
2. Apex Corporation manufactures a single high-performance mechanical
valve. The company's planning metrics reveal a selling price of $150 per
unit, variable expenses of $90 per unit, and total static fixed expenses of
$180,000 per year. The corporate director requests a structural breakeven
matrix to evaluate risk tolerance parameters for the upcoming product cycle.
What is the exact breakeven point in total sales dollars for Apex
Corporation?
A. $300,000
B. $450,000
C. $270,000
D. $180,000
CORRECT ANSWER: $450,000
RATIONALE: Step 1: Calculate the Contribution Margin (CM) Ratio
First, determine the profitability ratio after subtracting variable expenses from
the selling price:
• Formula:
CM Ratio = (Selling Price - Variable Expenses) / Selling Price
• Calculation:
CM Ratio = ($150 - $90) / $150 = $60 / $150 = 0.40 (or 40%)
Step 2: Calculate the Breakeven Point in Sales Dollars
Next, divide the total fixed expenses by the CM ratio to find the total revenue
needed to cover all costs:
, • Formula:
Breakeven Sales Dollars = Total Fixed Expenses / CM Ratio
• Calculation:
Breakeven Sales Dollars = $180,.40 = $450,000
Final Conclusion
The exact revenue needed to break even is $450,000.
• Correct Selection: Choice B
(Note: Choice A is an incorrect distractor. It represents the breakeven point in
units [3,000 units] multiplied by the variable cost instead of the selling
price).
3. Under a variable costing system, which of the following production costs is
treated explicitly as a period cost rather than a product cost on financial
reports?
A. Direct materials utilized in assembly line operations
B. Variable manufacturing overhead costs
C. Fixed manufacturing overhead costs
D. Direct labor costs tracked via operational routing codes
CORRECT ANSWER: Fixed manufacturing overhead costs
RATIONALE: Under variable costing, only variable production costs
(direct materials, direct labor, and variable manufacturing overhead) are
capitalized as product costs inside inventory accounts. Fixed
manufacturing overhead costs are treated entirely as period costs and are
expensed in full on the income statement in the period incurred, identical to
selling and administrative expenses. In contrast, absorption costing treats
fixed manufacturing overhead as a product cost, attaching it directly to units
of inventory. Choices A, B, and D are variable production components and
remain product costs under both variable and absorption costing models.
