ACCT 526 CERTIFICATION TEST 2026
COMPREHENSIVE QUESTIONS AND
SOLUTION GUIDE
◉ Alpha Company is evaluating a make-or-buy decision. Which of
the following is an example of an irrelevant cost with regard to a
make-or-buy decision?
Answer: cost of security guard who will guard the finished goods
inventory
◉ fixed expenses that cannot be traced to individual segments or
products. They will continue to exist even if one segment or product
is eliminated.
Answer: common fixed expense
◉ the difference between total sales and total variable costs on a
total basis, or price minus unit variable cost on a per-unit basis.
Total contribution margin is the amount left over from sales to
contribute to covering fixed costs and profit.
Answer: contribution margin
,◉ the cost behavior-based income statement. Costs are separated
into fixed and variable categories. First, total variable cost is
subtracted from sales to get the contribution margin. Next, total
fixed expenses are subtracted to get operating income (profit).
Answer: contribution margin income statement
◉ the ratio of total contribution margin to sales or of unit
contribution to price. Contribution margin ratio is also computed as
1 (100%) minus the variable cost ratio. It represents the percentage
of each sales dollar available to contribute to fixed cost and profit.
Answer: contribution margin ratio
◉ the company's relative mix of fixed to variable costs. It is useful in
determining operating leverage.
Answer: cost structure
◉ estimates how changes in costs (both variable and fixed), sales
volume, and price affect profit.
Answer: cost volume profit analysis (CVP)
◉ a graph showing the relationships among cost, volume (units
sold), and profit using a total cost line and a total revenue line. The
intersection of the total cost line with the total revenue line is the
break-even point.
Answer: CVP graph
, ◉ shows the degree to which fixed costs are used to obtain a higher
percent change in profits as sales change. DOL is equal to the total
contribution margin divided by operating income.
Answer: degree of operating leverage
◉ fixed expenses that can be traced to an individual segment or
product. If that segment or product is eliminated, the direct fixed
expense is eliminated.
Answer: direct fixed expenses
◉ the number of units sold or the amount of sales revenue earned
above the break-even point.
Answer: margin of safety
◉ occurs when fixed costs are used to obtain higher change in
profits as sales change.
Answer: operating leverage
◉ the relative combination of products sold by a company. Sales mix
is usually expressed in the lowest whole units. For example, a sales
mix of 3:2 means that for every 3 units of Product A sold, 2 units of
Product B are sold.
Answer: sales mix
COMPREHENSIVE QUESTIONS AND
SOLUTION GUIDE
◉ Alpha Company is evaluating a make-or-buy decision. Which of
the following is an example of an irrelevant cost with regard to a
make-or-buy decision?
Answer: cost of security guard who will guard the finished goods
inventory
◉ fixed expenses that cannot be traced to individual segments or
products. They will continue to exist even if one segment or product
is eliminated.
Answer: common fixed expense
◉ the difference between total sales and total variable costs on a
total basis, or price minus unit variable cost on a per-unit basis.
Total contribution margin is the amount left over from sales to
contribute to covering fixed costs and profit.
Answer: contribution margin
,◉ the cost behavior-based income statement. Costs are separated
into fixed and variable categories. First, total variable cost is
subtracted from sales to get the contribution margin. Next, total
fixed expenses are subtracted to get operating income (profit).
Answer: contribution margin income statement
◉ the ratio of total contribution margin to sales or of unit
contribution to price. Contribution margin ratio is also computed as
1 (100%) minus the variable cost ratio. It represents the percentage
of each sales dollar available to contribute to fixed cost and profit.
Answer: contribution margin ratio
◉ the company's relative mix of fixed to variable costs. It is useful in
determining operating leverage.
Answer: cost structure
◉ estimates how changes in costs (both variable and fixed), sales
volume, and price affect profit.
Answer: cost volume profit analysis (CVP)
◉ a graph showing the relationships among cost, volume (units
sold), and profit using a total cost line and a total revenue line. The
intersection of the total cost line with the total revenue line is the
break-even point.
Answer: CVP graph
, ◉ shows the degree to which fixed costs are used to obtain a higher
percent change in profits as sales change. DOL is equal to the total
contribution margin divided by operating income.
Answer: degree of operating leverage
◉ fixed expenses that can be traced to an individual segment or
product. If that segment or product is eliminated, the direct fixed
expense is eliminated.
Answer: direct fixed expenses
◉ the number of units sold or the amount of sales revenue earned
above the break-even point.
Answer: margin of safety
◉ occurs when fixed costs are used to obtain higher change in
profits as sales change.
Answer: operating leverage
◉ the relative combination of products sold by a company. Sales mix
is usually expressed in the lowest whole units. For example, a sales
mix of 3:2 means that for every 3 units of Product A sold, 2 units of
Product B are sold.
Answer: sales mix
