WGU D101 Cost and Managerial Accounting |
Western Governors University | Academic Year
2026/2027
SECTION I: Cost Concepts, Classification, and Behavior (Questions 1–25)
1. A manufacturer produces custom furniture. Which of the following costs would
be classified as a product cost under GAAP?
A) Sales commissions paid to the sales team
B) Depreciation on factory machinery
C) Advertising expense for a new product line
D) Salary of the company's chief financial officer
Correct Answer: B
Rationale: Product costs are those incurred to manufacture goods and are
capitalized as inventory until sold. They include direct materials, direct labor, and
manufacturing overhead. Depreciation on factory machinery is a manufacturing
overhead cost and therefore a product cost. Sales commissions, advertising, and
executive salaries are period costs, expensed in the period incurred.
2. Which of the following is an example of a variable cost for a manufacturer?
A) Factory rent of $10,000 per month
B) Property taxes on the factory building
C) Direct materials that cost $5 per unit produced
D) Salary of the production supervisor
Correct Answer: C
Rationale: Variable costs change in total in direct proportion to changes in
activity level. Direct materials cost $5 per unit, so total direct materials cost
increases as production increases. Factory rent, property taxes, and supervisor
salaries are fixed costs that remain constant in total within the relevant range.
,3. A company's total costs are $200,000 when 10,000 units are produced and
$240,000 when 12,000 units are produced. Using the high-low method, what is
the variable cost per unit?
A) $10.00
B) $15.00
C) $20.00
D) $24.00
Correct Answer: C
Rationale: High-low method: Variable cost per unit = (Highest cost −
Lowest cost) / (Highest activity − Lowest activity) = ($240,000 − $200,000) /
(12,000 − 10,000) = $40,,000 = $20.00 per unit.
4. Using the high-low method from Question 3, what is the total fixed cost?
A) $0
B) $20,000
C) $40,000
D) $60,000
Correct Answer: A
Rationale: Total cost = Fixed cost + (Variable cost per unit × Units). Using
the low point: $200,000 = Fixed cost + ($20 × 10,000) = Fixed cost + $200,000.
Therefore, Fixed cost = $0. Using the high point: $240,000 = Fixed cost + ($20 ×
12,000) = Fixed cost + $240,000, confirming Fixed cost = $0.
5. Which of the following costs is classified as a manufacturing overhead cost?
A) Wood used in furniture production
B) Wages of assembly line workers
C) Lubricants used on factory machinery
D) Depreciation on corporate headquarters computers
, Correct Answer: C
Rationale: Manufacturing overhead includes all manufacturing costs other
than direct materials and direct labor. Lubricants for factory machinery are
indirect materials and therefore part of manufacturing overhead. Wood is direct
material, assembly wages are direct labor, and corporate headquarters
depreciation is a period cost.
6. A company has the following costs: direct materials $50,000, direct labor
$30,000, variable manufacturing overhead $15,000, fixed manufacturing
overhead $25,000, and variable selling expenses $10,000. What is the total
product cost under absorption costing?
A) $95,000
B) $105,000
C) $120,000
D) $130,000
Correct Answer: C
Rationale: Under absorption costing, product costs include all
manufacturing costs: direct materials ($50,000) + direct labor ($30,000) + variable
manufacturing overhead ($15,000) + fixed manufacturing overhead ($25,000) =
$120,000. Variable selling expenses are period costs.
7. Which of the following describes a fixed cost?
A) A cost that varies per unit but is constant in total
B) A cost that remains constant in total within the relevant range
C) A cost that is always expensed in the period incurred
D) A cost that increases in total as production increases
Correct Answer: B
, Rationale: Fixed costs remain constant in total within the relevant range
of activity, though they decrease on a per-unit basis as activity increases. Variable
costs are constant per unit but vary in total.
8. SATA — Select all costs that are considered period costs.
A) Direct materials
B) Sales commissions
C) Factory rent
D) Advertising expense
E) Administrative salaries
Correct Answers: B, D, E
Rationale: Period costs are non-manufacturing costs expensed in the
period incurred. They include selling expenses (sales commissions, advertising)
and administrative expenses (administrative salaries). Direct materials and factory
rent are product costs.
9. Which cost behavior pattern is described by a step cost?
A) A cost that varies continuously with activity
B) A cost that remains constant in total over a wide range of activity
C) A cost that is constant over a small range of activity and then jumps to a new
level
D) A cost that decreases as activity increases
Correct Answer: C
Rationale: Step costs are constant over a narrow range of activity and then
increase in a step-like fashion when a new activity threshold is reached. An
example is adding a second shift supervisor when production exceeds a certain
level.
Western Governors University | Academic Year
2026/2027
SECTION I: Cost Concepts, Classification, and Behavior (Questions 1–25)
1. A manufacturer produces custom furniture. Which of the following costs would
be classified as a product cost under GAAP?
A) Sales commissions paid to the sales team
B) Depreciation on factory machinery
C) Advertising expense for a new product line
D) Salary of the company's chief financial officer
Correct Answer: B
Rationale: Product costs are those incurred to manufacture goods and are
capitalized as inventory until sold. They include direct materials, direct labor, and
manufacturing overhead. Depreciation on factory machinery is a manufacturing
overhead cost and therefore a product cost. Sales commissions, advertising, and
executive salaries are period costs, expensed in the period incurred.
2. Which of the following is an example of a variable cost for a manufacturer?
A) Factory rent of $10,000 per month
B) Property taxes on the factory building
C) Direct materials that cost $5 per unit produced
D) Salary of the production supervisor
Correct Answer: C
Rationale: Variable costs change in total in direct proportion to changes in
activity level. Direct materials cost $5 per unit, so total direct materials cost
increases as production increases. Factory rent, property taxes, and supervisor
salaries are fixed costs that remain constant in total within the relevant range.
,3. A company's total costs are $200,000 when 10,000 units are produced and
$240,000 when 12,000 units are produced. Using the high-low method, what is
the variable cost per unit?
A) $10.00
B) $15.00
C) $20.00
D) $24.00
Correct Answer: C
Rationale: High-low method: Variable cost per unit = (Highest cost −
Lowest cost) / (Highest activity − Lowest activity) = ($240,000 − $200,000) /
(12,000 − 10,000) = $40,,000 = $20.00 per unit.
4. Using the high-low method from Question 3, what is the total fixed cost?
A) $0
B) $20,000
C) $40,000
D) $60,000
Correct Answer: A
Rationale: Total cost = Fixed cost + (Variable cost per unit × Units). Using
the low point: $200,000 = Fixed cost + ($20 × 10,000) = Fixed cost + $200,000.
Therefore, Fixed cost = $0. Using the high point: $240,000 = Fixed cost + ($20 ×
12,000) = Fixed cost + $240,000, confirming Fixed cost = $0.
5. Which of the following costs is classified as a manufacturing overhead cost?
A) Wood used in furniture production
B) Wages of assembly line workers
C) Lubricants used on factory machinery
D) Depreciation on corporate headquarters computers
, Correct Answer: C
Rationale: Manufacturing overhead includes all manufacturing costs other
than direct materials and direct labor. Lubricants for factory machinery are
indirect materials and therefore part of manufacturing overhead. Wood is direct
material, assembly wages are direct labor, and corporate headquarters
depreciation is a period cost.
6. A company has the following costs: direct materials $50,000, direct labor
$30,000, variable manufacturing overhead $15,000, fixed manufacturing
overhead $25,000, and variable selling expenses $10,000. What is the total
product cost under absorption costing?
A) $95,000
B) $105,000
C) $120,000
D) $130,000
Correct Answer: C
Rationale: Under absorption costing, product costs include all
manufacturing costs: direct materials ($50,000) + direct labor ($30,000) + variable
manufacturing overhead ($15,000) + fixed manufacturing overhead ($25,000) =
$120,000. Variable selling expenses are period costs.
7. Which of the following describes a fixed cost?
A) A cost that varies per unit but is constant in total
B) A cost that remains constant in total within the relevant range
C) A cost that is always expensed in the period incurred
D) A cost that increases in total as production increases
Correct Answer: B
, Rationale: Fixed costs remain constant in total within the relevant range
of activity, though they decrease on a per-unit basis as activity increases. Variable
costs are constant per unit but vary in total.
8. SATA — Select all costs that are considered period costs.
A) Direct materials
B) Sales commissions
C) Factory rent
D) Advertising expense
E) Administrative salaries
Correct Answers: B, D, E
Rationale: Period costs are non-manufacturing costs expensed in the
period incurred. They include selling expenses (sales commissions, advertising)
and administrative expenses (administrative salaries). Direct materials and factory
rent are product costs.
9. Which cost behavior pattern is described by a step cost?
A) A cost that varies continuously with activity
B) A cost that remains constant in total over a wide range of activity
C) A cost that is constant over a small range of activity and then jumps to a new
level
D) A cost that decreases as activity increases
Correct Answer: C
Rationale: Step costs are constant over a narrow range of activity and then
increase in a step-like fashion when a new activity threshold is reached. An
example is adding a second shift supervisor when production exceeds a certain
level.
