ACC212
Managerial Accounting
Final Exam Review
2026
(Questions & Solutions)
Multiple Choice (MCQ)
A company uses Activity-Based Costing (ABC) and traditional costing. How would ABC
most likely impact the allocation of overhead compared to traditional costing? A)
Overhead costs are allocated solely based on direct labor hours B) Overhead costs are
allocated based on multiple cost drivers reflecting actual activities C) Overhead costs
are allocated evenly among products D) Overhead costs are not allocated in ABC
Answer: B
Rationale: ABC allocates overhead based on multiple cost drivers that reflect
consumption of activities, leading to more accurate costing than traditional single-
driver methods.
2. Which of the following is the primary purpose of a Responsibility Accounting
system?
A) To allocate indirect manufacturing costs evenly
B) To evaluate managerial performance through controllable costs
C) To prepare financial statements using GAAP
D) To determine product pricing strategies
,Answer: B
Rationale: Responsibility Accounting focuses on controlling and evaluating costs that
managers can influence for better performance management.
3. When preparing a flexible budget, fixed costs are generally:
A) Varied in proportion to activity levels
B) Maintained constant regardless of activity
C) Treated as zero
D) Allocated based on direct labor hours
Answer: B
Rationale: Fixed costs do not change with activity levels within the relevant range and
are kept constant in flexible budgets.
4. What is the main difference between Absorption Costing and Variable Costing?
A) Only variable costs are allocated to products in absorption costing
B) Fixed manufacturing overhead is treated as a period cost in absorption costing
C) Fixed manufacturing overhead is allocated to products in absorption costing but
expensed in variable costing
D) Direct materials are excluded from product cost in both methods
Answer: C
Rationale: Absorption costing assigns fixed manufacturing overhead to product costs,
whereas variable costing expenses it immediately.
5. In a make-or-buy decision, which costs should be considered?
A) Only variable costs
B) Only fixed costs
,C) All sunk costs
D) Relevant costs, including avoidable fixed and variable costs
Answer: D
Rationale: Relevant costs for decisions include costs that can be avoided by choosing
an alternative; sunk costs are irrelevant.
True/False
The Balanced Scorecard integrates financial and non-financial performance measures
to provide a comprehensive view of organizational performance.
True
Rationale: It goes beyond financial metrics to include customer, internal processes,
and learning/growth perspectives.
Standard costing is primarily used for external financial reporting.
False
Rationale: Standard costing is a management tool for cost control and variance
analysis, not for external reporting.
Contribution margin per unit is calculated as sales price per unit minus variable cost
per unit.
True
Rationale: Contribution margin represents how much each unit contributes to fixed
costs and profit after variable costs.
In cost-volume-profit analysis, the break-even point occurs where total sales revenue
equals total fixed costs.
False
Rationale: The break-even point is where total sales equal total costs (fixed plus
variable), not just fixed costs.
, A flexible budget variance measures the difference between actual results and static
budget amounts.
False
Rationale: The flexible budget variance compares actual results to the flexible budget
adjusted for actual activity levels.
Short Answer
Explain the advantage of using Relevant Costing for short-term decision-making.
Answer: Relevant costing focuses on costs and revenues that will change as a result of
a decision, eliminating irrelevant sunk and fixed costs, thus supporting better
decisions.
What is the primary objective of variance analysis in managerial accounting?
Answer: To identify differences between actual and budgeted performance, helping
managers understand causes and control costs.
Define 'cost driver' and give an example relevant to manufacturing overhead.
Answer: A cost driver is a factor that causes changes in the cost of an activity. For
example, machine hours can be a cost driver of manufacturing overhead.
What is throughput accounting, and how does it differ from traditional costing?
Answer: Throughput accounting focuses on maximizing throughput (sales minus
direct materials) and managing bottlenecks, unlike traditional costing which allocates
all costs.
Describe the term ‘controllable cost’ and explain why it is important in managerial
decision-making.
Answer: A controllable cost is a cost under the influence or control of a manager, vital
for evaluating managerial responsibility and performance.
Managerial Accounting
Final Exam Review
2026
(Questions & Solutions)
Multiple Choice (MCQ)
A company uses Activity-Based Costing (ABC) and traditional costing. How would ABC
most likely impact the allocation of overhead compared to traditional costing? A)
Overhead costs are allocated solely based on direct labor hours B) Overhead costs are
allocated based on multiple cost drivers reflecting actual activities C) Overhead costs
are allocated evenly among products D) Overhead costs are not allocated in ABC
Answer: B
Rationale: ABC allocates overhead based on multiple cost drivers that reflect
consumption of activities, leading to more accurate costing than traditional single-
driver methods.
2. Which of the following is the primary purpose of a Responsibility Accounting
system?
A) To allocate indirect manufacturing costs evenly
B) To evaluate managerial performance through controllable costs
C) To prepare financial statements using GAAP
D) To determine product pricing strategies
,Answer: B
Rationale: Responsibility Accounting focuses on controlling and evaluating costs that
managers can influence for better performance management.
3. When preparing a flexible budget, fixed costs are generally:
A) Varied in proportion to activity levels
B) Maintained constant regardless of activity
C) Treated as zero
D) Allocated based on direct labor hours
Answer: B
Rationale: Fixed costs do not change with activity levels within the relevant range and
are kept constant in flexible budgets.
4. What is the main difference between Absorption Costing and Variable Costing?
A) Only variable costs are allocated to products in absorption costing
B) Fixed manufacturing overhead is treated as a period cost in absorption costing
C) Fixed manufacturing overhead is allocated to products in absorption costing but
expensed in variable costing
D) Direct materials are excluded from product cost in both methods
Answer: C
Rationale: Absorption costing assigns fixed manufacturing overhead to product costs,
whereas variable costing expenses it immediately.
5. In a make-or-buy decision, which costs should be considered?
A) Only variable costs
B) Only fixed costs
,C) All sunk costs
D) Relevant costs, including avoidable fixed and variable costs
Answer: D
Rationale: Relevant costs for decisions include costs that can be avoided by choosing
an alternative; sunk costs are irrelevant.
True/False
The Balanced Scorecard integrates financial and non-financial performance measures
to provide a comprehensive view of organizational performance.
True
Rationale: It goes beyond financial metrics to include customer, internal processes,
and learning/growth perspectives.
Standard costing is primarily used for external financial reporting.
False
Rationale: Standard costing is a management tool for cost control and variance
analysis, not for external reporting.
Contribution margin per unit is calculated as sales price per unit minus variable cost
per unit.
True
Rationale: Contribution margin represents how much each unit contributes to fixed
costs and profit after variable costs.
In cost-volume-profit analysis, the break-even point occurs where total sales revenue
equals total fixed costs.
False
Rationale: The break-even point is where total sales equal total costs (fixed plus
variable), not just fixed costs.
, A flexible budget variance measures the difference between actual results and static
budget amounts.
False
Rationale: The flexible budget variance compares actual results to the flexible budget
adjusted for actual activity levels.
Short Answer
Explain the advantage of using Relevant Costing for short-term decision-making.
Answer: Relevant costing focuses on costs and revenues that will change as a result of
a decision, eliminating irrelevant sunk and fixed costs, thus supporting better
decisions.
What is the primary objective of variance analysis in managerial accounting?
Answer: To identify differences between actual and budgeted performance, helping
managers understand causes and control costs.
Define 'cost driver' and give an example relevant to manufacturing overhead.
Answer: A cost driver is a factor that causes changes in the cost of an activity. For
example, machine hours can be a cost driver of manufacturing overhead.
What is throughput accounting, and how does it differ from traditional costing?
Answer: Throughput accounting focuses on maximizing throughput (sales minus
direct materials) and managing bottlenecks, unlike traditional costing which allocates
all costs.
Describe the term ‘controllable cost’ and explain why it is important in managerial
decision-making.
Answer: A controllable cost is a cost under the influence or control of a manager, vital
for evaluating managerial responsibility and performance.
