ACG 2071 Introduction to Managerial
Accounting
Final Assessment Review
(Questions & Solutions)
2025
©2025
, 1. Case Study – Job Costing in Manufacturing
A manufacturing company produces custom electronics on a job‐order
basis. For a recent high‐value order, the controller noted that direct
materials and direct labor costs were easily traceable, but overhead
allocation was more challenging due to the diversity of production
processes.
Question: Which costing system is most appropriate for this scenario?
A. Process costing
B. Standard costing
C. Activity‑based costing
D. Job‑order costing
ANS: D. Job‑order costing
Rationale: Job‑order costing is ideal when products are unique and
costs can be traced to individual orders. Overhead is allocated on a
job‑by‑job basis, which suits custom electronics manufacturing.
---
2. Case Study – Variance Analysis
A company budgeted \$500,000 for direct labor in a manufacturing
process but actually incurred \$550,000. However, the company
produced 10% more units than expected.
Question: Which of the following best explains this situation using
flexible budgeting techniques?
A. Favorable efficiency variance but unfavorable spending variance
B. Unfavorable efficiency and spending variances
C. Favorable spending variance but unfavorable efficiency variance
D. No variance, as increased production offsets higher costs
ANS: A. Favorable efficiency variance but unfavorable spending
variance
Rationale: When production is 10% above budgeted, more labor is
needed. However, if the labor cost per unit is lower than expected
©2025
, (favorable efficiency), only a part of the \$50,000 overrun is “bad,” even
if total spending is higher than the static budget.
---
3. Case Study – Activity-Based Costing (ABC)
A firm finds that its traditional overhead allocation methods are
distorting cost information for diversified products. Therefore, the CFO
suggests implementing an activity‑based costing system.
Question: What is the primary benefit of using ABC in this context?
A. It simplifies costing by allocating overhead on a uniform basis.
B. It allows for a more accurate assignment of overhead costs by linking
them to specific activities.
C. It reduces total manufacturing costs by eliminating non‑value‑adding
activities automatically.
D. It replaces all direct costing methods with fixed cost allocation.
ANS: B. It allows for a more accurate assignment of overhead costs
by linking them to specific activities.
Rationale: ABC assigns overhead based on the actual consumption of
activities by products, producing more accurate product costs, especially
when products differ significantly in consumption patterns.
---
4. Case Study – CVP Analysis for Decision Making
A retail business is launching a new product, and management must
decide on the selling price based on an analysis of fixed costs, variable
costs, and expected sales volume.
Question: Which concept does the cost‑volume‑profit (CVP) analysis
help management determine?
A. The optimal mix of products
B. The break‑even point and profit sensitivity to changes in volume, cost,
and price
C. The long‑term effects of market saturation
D. The elasticity of demand
©2025
Accounting
Final Assessment Review
(Questions & Solutions)
2025
©2025
, 1. Case Study – Job Costing in Manufacturing
A manufacturing company produces custom electronics on a job‐order
basis. For a recent high‐value order, the controller noted that direct
materials and direct labor costs were easily traceable, but overhead
allocation was more challenging due to the diversity of production
processes.
Question: Which costing system is most appropriate for this scenario?
A. Process costing
B. Standard costing
C. Activity‑based costing
D. Job‑order costing
ANS: D. Job‑order costing
Rationale: Job‑order costing is ideal when products are unique and
costs can be traced to individual orders. Overhead is allocated on a
job‑by‑job basis, which suits custom electronics manufacturing.
---
2. Case Study – Variance Analysis
A company budgeted \$500,000 for direct labor in a manufacturing
process but actually incurred \$550,000. However, the company
produced 10% more units than expected.
Question: Which of the following best explains this situation using
flexible budgeting techniques?
A. Favorable efficiency variance but unfavorable spending variance
B. Unfavorable efficiency and spending variances
C. Favorable spending variance but unfavorable efficiency variance
D. No variance, as increased production offsets higher costs
ANS: A. Favorable efficiency variance but unfavorable spending
variance
Rationale: When production is 10% above budgeted, more labor is
needed. However, if the labor cost per unit is lower than expected
©2025
, (favorable efficiency), only a part of the \$50,000 overrun is “bad,” even
if total spending is higher than the static budget.
---
3. Case Study – Activity-Based Costing (ABC)
A firm finds that its traditional overhead allocation methods are
distorting cost information for diversified products. Therefore, the CFO
suggests implementing an activity‑based costing system.
Question: What is the primary benefit of using ABC in this context?
A. It simplifies costing by allocating overhead on a uniform basis.
B. It allows for a more accurate assignment of overhead costs by linking
them to specific activities.
C. It reduces total manufacturing costs by eliminating non‑value‑adding
activities automatically.
D. It replaces all direct costing methods with fixed cost allocation.
ANS: B. It allows for a more accurate assignment of overhead costs
by linking them to specific activities.
Rationale: ABC assigns overhead based on the actual consumption of
activities by products, producing more accurate product costs, especially
when products differ significantly in consumption patterns.
---
4. Case Study – CVP Analysis for Decision Making
A retail business is launching a new product, and management must
decide on the selling price based on an analysis of fixed costs, variable
costs, and expected sales volume.
Question: Which concept does the cost‑volume‑profit (CVP) analysis
help management determine?
A. The optimal mix of products
B. The break‑even point and profit sensitivity to changes in volume, cost,
and price
C. The long‑term effects of market saturation
D. The elasticity of demand
©2025
