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Advanced Cost Accounting & Managerial Accounting: 200+
Challenging Exam Questions with Detailed Solutions
(Variances, CVP, Job & Process Costing, Budgeting)
Cost Accounting / Managerial Accounting
Ideal For:
● Students preparing for intermediate to advanced accounting exams
● Learners seeking a deeper understanding of cost control, budgeting, and
costing systems
● Detailed solutions to complex, frequently tested questions
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Advanced Cost Accounting & Managerial Accounting: 200+ Challenging
Exam Questions with Detailed Solutions (Variances, CVP, Job & Process
Costing, Budgeting)
1. A company sells a product for $50 per unit. Variable costs are $30 per unit, and fixed
costs total $60,000. Calculate the break-even sales volume in units and dollars.
A) 2,000 units; $100,000
B) 3,000 units; $150,000
C) 1,500 units; $75,000
D) 2,500 units; $125,000
The answer is: B
Solution:
Contribution margin per unit = Selling price - Variable cost = $50 - $30 = $20
Break-even volume (units) = Fixed costs / Contribution margin per unit = $60,000 / $20 = 3,000
units
Break-even sales dollars = Break-even units × Price per unit = 3,000 × $50 = $150,000
2. A company wants to earn a target profit of $40,000. The selling price is $80 per unit,
variable cost is $50 per unit, and fixed costs are $90,000. Calculate the required sales
volume to achieve the target profit.
A) 4,000 units
B) 3,000 units
C) 5,000 units
D) 2,667 units
The answer is: None of the above (Exact answer: 4,333 units)
Solution:
Contribution margin per unit = $80 - $50 = $30
Required sales volume = (Fixed costs + Target profit) / Contribution margin per unit = ($90,000
+ $40,000) / $30 = 130, = 4,333 units
3. A company sells 10,000 units at $25 each. Variable costs are 60% of sales, and fixed costs
are $50,000. Calculate net operating income.
A) $50,000
B) $40,000
C) $30,000
D) $20,000
The answer is: A
Solution:
Sales revenue = 10,000 × $25 = $250,000
Variable costs = 60% × $250,000 = $150,000
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Contribution margin = Sales - Variable costs = $250,000 - $150,000 = $100,000
Net operating income = Contribution margin - Fixed costs = $100,000 - $50,000 = $50,000
4. The sales mix of products A and B is 3:2. Product A sells for $60 with a variable cost of
$36, and product B sells for $40 with a variable cost of $24. Fixed costs are $150,000.
Calculate the break-even sales in units for both products.
A) A: 3,000 units; B: 2,000 units
B) A: 2,500 units; B: 1,667 units
C) A: 4,000 units; B: 2,667 units
D) A: 3,500 units; B: 2,333 units
The answer is: None exactly, closest is A
Solution:
Contribution margin A = $60 - $36 = $24
Contribution margin B = $40 - $24 = $16
Weighted average contribution margin (WACM) = [(3/5) × 24] + [(2/5) × 16] = 14.4 + 6.4 =
$20.8
Break-even total units = Fixed costs / WACM = 150,.8 = 7,212 units (total)
Product A = (3/5) × 7,212 = 4,327 units
Product B = (2/5) × 7,212 = 2,885 units
5. A company produces 5,000 units and incurs fixed costs of $80,000 and variable costs of
$30 per unit. The selling price per unit is $50. What is the margin of safety in dollars if
actual sales are 6,000 units?
A) $20,000
B) $30,000
C) $40,000
D) $50,000
The answer is: None exactly, margin of safety is $100,000
Solution:
Break-even sales units = Fixed costs / (Selling price - Variable cost) = 80,000 / (50 - 30) = 4,000
units
Actual sales = 6,000 units
Margin of safety (units) = Actual sales - Break-even sales = 6,000 - 4,000 = 2,000 units
Margin of safety in dollars = 2,000 × $50 = $100,000
6. A company has fixed costs of $120,000, sells a product at $40 per unit, and the variable
cost per unit is $25. Calculate the break-even point in units and the sales needed to earn a
profit of $30,000.
A) Break-even: 8,000 units; Sales for profit: 9,200 units
B) Break-even: 5,000 units; Sales for profit: 6,200 units
C) Break-even: 4,800 units; Sales for profit: 6,000 units
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D) Break-even: 7,000 units; Sales for profit: 8,500 units
The answer is: A
Solution:
Contribution margin per unit = $40 - $25 = $15
Break-even units = Fixed costs / Contribution margin = $120,000 / $15 = 8,000 units
Sales for profit units = (Fixed costs + Desired profit) / Contribution margin = ($120,000 +
$30,000) / $15 = 150, = 10,000 units
7. A company produces 2 products, X and Y. Product X sells for $100 with variable costs of
$60, and Product Y sells for $150 with variable costs of $90. The sales mix ratio is 2:3.
Fixed costs are $300,000. Calculate the weighted average contribution margin per unit.
A) $50
B) $48
C) $55
D) $52
The answer is: B
Solution:
Contribution margin X = $100 - $60 = $40
Contribution margin Y = $150 - $90 = $60
Weighted average contribution margin = [(2/5) × 40] + [(3/5) × 60] = 16 + 36 = $52
8. A company’s fixed costs are $75,000, variable cost per unit is $15, and selling price per
unit is $25. If the company sells 7,000 units, calculate the net operating income.
A) $25,000
B) $35,000
C) $40,000
D) $30,000
The answer is: B
Solution:
Contribution margin per unit = $25 - $15 = $10
Total contribution margin = 7,000 × $10 = $70,000
Net operating income = Total contribution margin - Fixed costs = $70,000 - $75,000 = -$5,000
(a loss)
Since none of the answers are negative, correct net operating income is a loss of $5,000.
9. A company has fixed costs of $150,000, a selling price of $60 per unit, and variable cost
of $40 per unit. What is the break-even sales revenue?
A) $300,000
B) $375,000
C) $450,000
D) $500,000
Advanced Cost Accounting & Managerial Accounting: 200+
Challenging Exam Questions with Detailed Solutions
(Variances, CVP, Job & Process Costing, Budgeting)
Cost Accounting / Managerial Accounting
Ideal For:
● Students preparing for intermediate to advanced accounting exams
● Learners seeking a deeper understanding of cost control, budgeting, and
costing systems
● Detailed solutions to complex, frequently tested questions
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Advanced Cost Accounting & Managerial Accounting: 200+ Challenging
Exam Questions with Detailed Solutions (Variances, CVP, Job & Process
Costing, Budgeting)
1. A company sells a product for $50 per unit. Variable costs are $30 per unit, and fixed
costs total $60,000. Calculate the break-even sales volume in units and dollars.
A) 2,000 units; $100,000
B) 3,000 units; $150,000
C) 1,500 units; $75,000
D) 2,500 units; $125,000
The answer is: B
Solution:
Contribution margin per unit = Selling price - Variable cost = $50 - $30 = $20
Break-even volume (units) = Fixed costs / Contribution margin per unit = $60,000 / $20 = 3,000
units
Break-even sales dollars = Break-even units × Price per unit = 3,000 × $50 = $150,000
2. A company wants to earn a target profit of $40,000. The selling price is $80 per unit,
variable cost is $50 per unit, and fixed costs are $90,000. Calculate the required sales
volume to achieve the target profit.
A) 4,000 units
B) 3,000 units
C) 5,000 units
D) 2,667 units
The answer is: None of the above (Exact answer: 4,333 units)
Solution:
Contribution margin per unit = $80 - $50 = $30
Required sales volume = (Fixed costs + Target profit) / Contribution margin per unit = ($90,000
+ $40,000) / $30 = 130, = 4,333 units
3. A company sells 10,000 units at $25 each. Variable costs are 60% of sales, and fixed costs
are $50,000. Calculate net operating income.
A) $50,000
B) $40,000
C) $30,000
D) $20,000
The answer is: A
Solution:
Sales revenue = 10,000 × $25 = $250,000
Variable costs = 60% × $250,000 = $150,000
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Contribution margin = Sales - Variable costs = $250,000 - $150,000 = $100,000
Net operating income = Contribution margin - Fixed costs = $100,000 - $50,000 = $50,000
4. The sales mix of products A and B is 3:2. Product A sells for $60 with a variable cost of
$36, and product B sells for $40 with a variable cost of $24. Fixed costs are $150,000.
Calculate the break-even sales in units for both products.
A) A: 3,000 units; B: 2,000 units
B) A: 2,500 units; B: 1,667 units
C) A: 4,000 units; B: 2,667 units
D) A: 3,500 units; B: 2,333 units
The answer is: None exactly, closest is A
Solution:
Contribution margin A = $60 - $36 = $24
Contribution margin B = $40 - $24 = $16
Weighted average contribution margin (WACM) = [(3/5) × 24] + [(2/5) × 16] = 14.4 + 6.4 =
$20.8
Break-even total units = Fixed costs / WACM = 150,.8 = 7,212 units (total)
Product A = (3/5) × 7,212 = 4,327 units
Product B = (2/5) × 7,212 = 2,885 units
5. A company produces 5,000 units and incurs fixed costs of $80,000 and variable costs of
$30 per unit. The selling price per unit is $50. What is the margin of safety in dollars if
actual sales are 6,000 units?
A) $20,000
B) $30,000
C) $40,000
D) $50,000
The answer is: None exactly, margin of safety is $100,000
Solution:
Break-even sales units = Fixed costs / (Selling price - Variable cost) = 80,000 / (50 - 30) = 4,000
units
Actual sales = 6,000 units
Margin of safety (units) = Actual sales - Break-even sales = 6,000 - 4,000 = 2,000 units
Margin of safety in dollars = 2,000 × $50 = $100,000
6. A company has fixed costs of $120,000, sells a product at $40 per unit, and the variable
cost per unit is $25. Calculate the break-even point in units and the sales needed to earn a
profit of $30,000.
A) Break-even: 8,000 units; Sales for profit: 9,200 units
B) Break-even: 5,000 units; Sales for profit: 6,200 units
C) Break-even: 4,800 units; Sales for profit: 6,000 units
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D) Break-even: 7,000 units; Sales for profit: 8,500 units
The answer is: A
Solution:
Contribution margin per unit = $40 - $25 = $15
Break-even units = Fixed costs / Contribution margin = $120,000 / $15 = 8,000 units
Sales for profit units = (Fixed costs + Desired profit) / Contribution margin = ($120,000 +
$30,000) / $15 = 150, = 10,000 units
7. A company produces 2 products, X and Y. Product X sells for $100 with variable costs of
$60, and Product Y sells for $150 with variable costs of $90. The sales mix ratio is 2:3.
Fixed costs are $300,000. Calculate the weighted average contribution margin per unit.
A) $50
B) $48
C) $55
D) $52
The answer is: B
Solution:
Contribution margin X = $100 - $60 = $40
Contribution margin Y = $150 - $90 = $60
Weighted average contribution margin = [(2/5) × 40] + [(3/5) × 60] = 16 + 36 = $52
8. A company’s fixed costs are $75,000, variable cost per unit is $15, and selling price per
unit is $25. If the company sells 7,000 units, calculate the net operating income.
A) $25,000
B) $35,000
C) $40,000
D) $30,000
The answer is: B
Solution:
Contribution margin per unit = $25 - $15 = $10
Total contribution margin = 7,000 × $10 = $70,000
Net operating income = Total contribution margin - Fixed costs = $70,000 - $75,000 = -$5,000
(a loss)
Since none of the answers are negative, correct net operating income is a loss of $5,000.
9. A company has fixed costs of $150,000, a selling price of $60 per unit, and variable cost
of $40 per unit. What is the break-even sales revenue?
A) $300,000
B) $375,000
C) $450,000
D) $500,000
