ACC 406 Midterm Exam Questions and Answers Latest Update 2025-2026
Calculating Total Product Cost - Answers Direct Materials + Direct Labour + Manufacturing
Overhead
Calculating Unit Product Costs - Answers Total Product Cost/Number of units produced
Calculating Prime Costs - Answers Direct Materials + Direct Labour
Calculating Conversion Costs - Answers Direct Labour + Manufacturing Overhead
Calculating Gross Margin Percentage - Answers Gross Margin/Sales Revenue
Calculating Operating Income - Answers Gross Margin - Selling and Administrative Expenses
Service Operations - Answers No product to purchase or to manufacture
Cost of Goods Manufactured (COGM) - Answers The total cost of making products that are
available for sale during the period
Gross Margin - Answers Difference between sales revenue and cost of goods sold (COGS)
Cost Behaviour - Answers Describes whether a cost change when the level of activity changes.
It is the foundation upon which managerial accounting is built and is essential to planning,
controlling, and decision making.
Fixed Costs - Answers Cost that does not change in total as activity changes
Discretionary Fixed Costs - Answers Costs that can be changed or avoided relatively easily at
management's discretion
Committed Fixed Costs - Answers Costs that cannot be easily changed; these often involve a
long-term contract
Variable Costs - Answers Costs that vary in direct proportion to changes in output within the
relevant range
Total Variable Cost - Answers Variable Rate Per Unit x Units of Output
Mixed Costs - Answers Costs that have both a fixed and a variable component
High Low Method - Answers Method of separating mixed costs into fixed and variable
components by using just the high and low data points
Using the High Low Method - Answers 1. Find high point and low point for the activity or output
level
2. Using the high and low points, calculate the variable rate
Calculating Total Product Cost - Answers Direct Materials + Direct Labour + Manufacturing
Overhead
Calculating Unit Product Costs - Answers Total Product Cost/Number of units produced
Calculating Prime Costs - Answers Direct Materials + Direct Labour
Calculating Conversion Costs - Answers Direct Labour + Manufacturing Overhead
Calculating Gross Margin Percentage - Answers Gross Margin/Sales Revenue
Calculating Operating Income - Answers Gross Margin - Selling and Administrative Expenses
Service Operations - Answers No product to purchase or to manufacture
Cost of Goods Manufactured (COGM) - Answers The total cost of making products that are
available for sale during the period
Gross Margin - Answers Difference between sales revenue and cost of goods sold (COGS)
Cost Behaviour - Answers Describes whether a cost change when the level of activity changes.
It is the foundation upon which managerial accounting is built and is essential to planning,
controlling, and decision making.
Fixed Costs - Answers Cost that does not change in total as activity changes
Discretionary Fixed Costs - Answers Costs that can be changed or avoided relatively easily at
management's discretion
Committed Fixed Costs - Answers Costs that cannot be easily changed; these often involve a
long-term contract
Variable Costs - Answers Costs that vary in direct proportion to changes in output within the
relevant range
Total Variable Cost - Answers Variable Rate Per Unit x Units of Output
Mixed Costs - Answers Costs that have both a fixed and a variable component
High Low Method - Answers Method of separating mixed costs into fixed and variable
components by using just the high and low data points
Using the High Low Method - Answers 1. Find high point and low point for the activity or output
level
2. Using the high and low points, calculate the variable rate
