ACCT 526 FINAL EXAM | ALL QUESTIONS AND CORRECT ANSWERS | VERIFIED
ANSWERS | GRADED A+ | NEWEST EXAM (JUST RELEASED)
Question 1
Overhead costs are assigned to production using an overhead application rate, whereas no such
application rate is used to assign the costs of direct materials and direct labor to production. The
reason for this difference in procedures is that:
A) Overhead costs are always smaller than direct costs
B) Direct materials and labor are period costs
C) Overhead is an indirect cost which cannot be traced easily and directly to specific units of
product
D) Overhead rates are required by the Internal Revenue Service
E) Direct costs are too difficult to calculate individually
Correct Answer: C) overhead is an indirect cost which cannot be traced easily and directly to
specific units of product
Rationale: Unlike direct materials and direct labor, which can be physically traced to a
specific unit of output, overhead consists of various indirect costs (like factory utilities or
supervisor salaries) that must be allocated using an estimate or "application rate" because
they support the entire production process rather than a single unit.
Question 2
An advantage of using regression analysis over the high-low and scattergraph methods is that:
A) It is much faster to calculate by hand
B) It only requires two data points
C) Regression analysis is a more precise approach than the high-low or scattergraph methods
D) It ignores all fixed cost components
E) It is based purely on subjective management judgment
Correct Answer: C) regression analysis is a more precise approach than the high-low or
scattergraph methods
Rationale: Regression analysis is a statistical method that utilizes all available data points to
find the "line of best fit," whereas the high-low method only uses two points (the extremes),
potentially leading to less accurate results if those points are outliers.
Question 3
An example of a discretionary fixed cost is:
A) Property taxes
B) Depreciation on a factory building
C) Management training
D) Insurance premiums on equipment
E) Long-term lease payments
Correct Answer: C) management training
Rationale: Discretionary fixed costs are those that arise from annual decisions by
management to spend on certain items, which can be reduced or eliminated in the short
, 2
term with minimal damage to long-term goals. Management training and advertising are
classic examples.
Question 4
Tucker, Inc. collected the following production data: 1,600 units at $22,000; 1,300 units at
$19,000; 1,500 units at $22,500; 1,100 units at $16,500. Using the high-low method, what is the
monthly total cost equation?
A) Total cost = $5,000 + $10/unit
B) Total cost = $4,400 + $11/unit
C) Total cost = $11,000 + $5/unit
D) Total cost = $2,000 + $12/unit
E) Total cost = $0 + $15/unit
Correct Answer: B) Total cost = $4,400 + 11/𝑢𝑛𝑖𝑡𝑅𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑒𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒𝑐𝑜𝑠𝑡𝑝𝑒𝑟𝑢𝑛𝑖𝑡 =
(𝐻𝑖𝑔ℎ𝐶𝑜𝑠𝑡 − 𝐿𝑜𝑤𝐶𝑜𝑠𝑡)/(𝐻𝑖𝑔ℎ𝑈𝑛𝑖𝑡𝑠 − 𝐿𝑜𝑤𝑈𝑛𝑖𝑡𝑠) = (22,000 - $16,500) / (1,600 - 1,100) =
$5, = $11 per unit. Fixed Cost = Total Cost - (Variable Cost * Units) = 22,000 − (
11 * 1,600) = $4,400. Thus, Y = $4,400 + $11x.
Question 5
Roddy Company has overhead cost formulas: Indirect materials ($2,000 + 0.40/
𝑀𝐻), 𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒(1,500 + 0.60/𝑀𝐻), 𝑀𝑎𝑐ℎ𝑖𝑛𝑒𝑠𝑒𝑡𝑢𝑝(0.30/MH), Utilities ($200
+ 0.10/𝑀𝐻), 𝑎𝑛𝑑𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛(800). What is the total overhead cost at 600 machine hours?
A) $4,500
B) $5,000
C) $5,340
D) $6,120
E) 4,800𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐶)5,340
Rationale: Total Fixed Costs = $2,000 + $1,500 + $200 + $800 = $4,500. Total Variable Rate =
$0.40 + $0.60 + $0.30 + $0.10 = $1.40 per MH. Total Cost at 600 MH = 4,500 + (1.40 * 600)
= $4,500 + $840 = $5,340.
Question 6
When comparing a traditional income statement to a contribution margin income statement:
A) Traditional statements show higher profits
B) Net income will always be identical on both
C) Contribution margin statements are used for external reporting
D) Traditional statements separate costs by behavior
E) Contribution margin statements are required by GAAP
Correct Answer: B) net income will always be identical on both
Rationale: The two formats simply organize the same data differently. The traditional
statement categorizes costs by function (Cost of Goods Sold vs. Selling/Admin), while the
, 3
contribution margin statement categorizes by behavior (Variable vs. Fixed). The resulting
net income remains the same.
Question 7
Kendra Corporation sells 100,000 wrenches for $12/unit. Fixed costs are $300,000 and net
income is $200,000. What should be reported as variable expenses?
A) $1,200,000
B) $900,000
C) $500,000
D) $700,000
E) 400,000𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐷)700,000
Rationale: Total Sales = 100,000 * $12 = $1,200,000. Sales - Variable Expenses - Fixed
Expenses = Net Income. $1,200,000 - Variable Expenses - $300,000 = $200,000. Variable
Expenses = $1,200,000 - $300,000 - $200,000 = $700,000.
Question 8
Snyder Corporation experienced an increase in fixed costs (depreciation). If variable costs and
sales price remain unchanged, what will happen to the contribution margin and the break-even
point?
A) Both will increase
B) Both will decrease
C) Contribution margin will decrease and break-even will increase
D) Contribution margin will be unchanged and the break-even point will increase
E) Contribution margin will increase and break-even will decrease
Correct Answer: D) contribution margin will be unchanged and the break-even point will
increase
Rationale: Contribution Margin is calculated as Sales minus Variable Costs; since neither
changed, the CM remains the same. However, the Break-Even Point = Fixed Costs / Unit
CM. If the numerator (Fixed Costs) increases, the break-even point must also increase.
Question 9
Last month's CVP statement: Sales (10,000 units) $1,200,000; Variable expenses $800,000;
Fixed expenses $240,000. What is the company's break-even sales in units?
A) 4,000 units
B) 6,000 units
C) 8,000 units
D) 5,000 units
E) 7,500 units
Correct Answer: B) 6,000 units
Rationale: Unit Sales Price = $1,200,,000 = $120. Unit Variable Cost = $800,000 /
, 4
10,000 = $80. Unit Contribution Margin = $120 - $80 = $40. Break-even units = Fixed Costs
/ Unit CM = $240,000 / $40 = 6,000 units.
Question 10
A 45% contribution margin ratio means that:
A) 45% of every sales dollar goes to net income
B) Variable costs are 45% of sales
C) 45% of the company's revenue is available to cover fixed costs and to contribute toward
operating income.
D) The company has a 45% markup on its products
E) Fixed costs are 45% of variable costs
Correct Answer: C) 45% of the company's revenue is available to cover fixed costs and to
contribute toward operating income.
Rationale: The CM ratio indicates the percentage of each sales dollar remaining after
variable costs are covered. This remainder is used to pay for fixed expenses; once fixed
expenses are covered, the rest becomes profit.
Question 11
Motel 6 has annual fixed costs of $1.2 million, average daily room rents of $50, and variable
costs of $10 per room. It has 300 rooms and operates 365 days. How much net income is
generated if the motel is completely full all year?
A) $3,180,000
B) $4,380,000
C) $5,475,000
D) $2,980,000
E) 1,200,000
𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐴) 3,180,000
Rationale: Total Revenue = 300 rooms * 365 days * $50 = $5,475,000. Total Variable Cost =
300 * 365 * $10 = $1,095,000. Total Contribution Margin = $5,475,000 - $1,095,000 =
$4,380,000. Net Income = CM - Fixed Costs = $4,380,000 - $1,200,000 = $3,180,000.
Question 12
Brant Company manufactures a part. Costs for 5,000 units: DM $3, DL $5, Var-OH $4, Fixed-
OH $2. Fixed OH is unavoidable. Assuming no other use of facilities, what is the highest price
Brant should pay an outside supplier?
A) $14
B) $8
C) $12
D) $10
E) 9𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐶)12
ANSWERS | GRADED A+ | NEWEST EXAM (JUST RELEASED)
Question 1
Overhead costs are assigned to production using an overhead application rate, whereas no such
application rate is used to assign the costs of direct materials and direct labor to production. The
reason for this difference in procedures is that:
A) Overhead costs are always smaller than direct costs
B) Direct materials and labor are period costs
C) Overhead is an indirect cost which cannot be traced easily and directly to specific units of
product
D) Overhead rates are required by the Internal Revenue Service
E) Direct costs are too difficult to calculate individually
Correct Answer: C) overhead is an indirect cost which cannot be traced easily and directly to
specific units of product
Rationale: Unlike direct materials and direct labor, which can be physically traced to a
specific unit of output, overhead consists of various indirect costs (like factory utilities or
supervisor salaries) that must be allocated using an estimate or "application rate" because
they support the entire production process rather than a single unit.
Question 2
An advantage of using regression analysis over the high-low and scattergraph methods is that:
A) It is much faster to calculate by hand
B) It only requires two data points
C) Regression analysis is a more precise approach than the high-low or scattergraph methods
D) It ignores all fixed cost components
E) It is based purely on subjective management judgment
Correct Answer: C) regression analysis is a more precise approach than the high-low or
scattergraph methods
Rationale: Regression analysis is a statistical method that utilizes all available data points to
find the "line of best fit," whereas the high-low method only uses two points (the extremes),
potentially leading to less accurate results if those points are outliers.
Question 3
An example of a discretionary fixed cost is:
A) Property taxes
B) Depreciation on a factory building
C) Management training
D) Insurance premiums on equipment
E) Long-term lease payments
Correct Answer: C) management training
Rationale: Discretionary fixed costs are those that arise from annual decisions by
management to spend on certain items, which can be reduced or eliminated in the short
, 2
term with minimal damage to long-term goals. Management training and advertising are
classic examples.
Question 4
Tucker, Inc. collected the following production data: 1,600 units at $22,000; 1,300 units at
$19,000; 1,500 units at $22,500; 1,100 units at $16,500. Using the high-low method, what is the
monthly total cost equation?
A) Total cost = $5,000 + $10/unit
B) Total cost = $4,400 + $11/unit
C) Total cost = $11,000 + $5/unit
D) Total cost = $2,000 + $12/unit
E) Total cost = $0 + $15/unit
Correct Answer: B) Total cost = $4,400 + 11/𝑢𝑛𝑖𝑡𝑅𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑒𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒𝑐𝑜𝑠𝑡𝑝𝑒𝑟𝑢𝑛𝑖𝑡 =
(𝐻𝑖𝑔ℎ𝐶𝑜𝑠𝑡 − 𝐿𝑜𝑤𝐶𝑜𝑠𝑡)/(𝐻𝑖𝑔ℎ𝑈𝑛𝑖𝑡𝑠 − 𝐿𝑜𝑤𝑈𝑛𝑖𝑡𝑠) = (22,000 - $16,500) / (1,600 - 1,100) =
$5, = $11 per unit. Fixed Cost = Total Cost - (Variable Cost * Units) = 22,000 − (
11 * 1,600) = $4,400. Thus, Y = $4,400 + $11x.
Question 5
Roddy Company has overhead cost formulas: Indirect materials ($2,000 + 0.40/
𝑀𝐻), 𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒(1,500 + 0.60/𝑀𝐻), 𝑀𝑎𝑐ℎ𝑖𝑛𝑒𝑠𝑒𝑡𝑢𝑝(0.30/MH), Utilities ($200
+ 0.10/𝑀𝐻), 𝑎𝑛𝑑𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛(800). What is the total overhead cost at 600 machine hours?
A) $4,500
B) $5,000
C) $5,340
D) $6,120
E) 4,800𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐶)5,340
Rationale: Total Fixed Costs = $2,000 + $1,500 + $200 + $800 = $4,500. Total Variable Rate =
$0.40 + $0.60 + $0.30 + $0.10 = $1.40 per MH. Total Cost at 600 MH = 4,500 + (1.40 * 600)
= $4,500 + $840 = $5,340.
Question 6
When comparing a traditional income statement to a contribution margin income statement:
A) Traditional statements show higher profits
B) Net income will always be identical on both
C) Contribution margin statements are used for external reporting
D) Traditional statements separate costs by behavior
E) Contribution margin statements are required by GAAP
Correct Answer: B) net income will always be identical on both
Rationale: The two formats simply organize the same data differently. The traditional
statement categorizes costs by function (Cost of Goods Sold vs. Selling/Admin), while the
, 3
contribution margin statement categorizes by behavior (Variable vs. Fixed). The resulting
net income remains the same.
Question 7
Kendra Corporation sells 100,000 wrenches for $12/unit. Fixed costs are $300,000 and net
income is $200,000. What should be reported as variable expenses?
A) $1,200,000
B) $900,000
C) $500,000
D) $700,000
E) 400,000𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐷)700,000
Rationale: Total Sales = 100,000 * $12 = $1,200,000. Sales - Variable Expenses - Fixed
Expenses = Net Income. $1,200,000 - Variable Expenses - $300,000 = $200,000. Variable
Expenses = $1,200,000 - $300,000 - $200,000 = $700,000.
Question 8
Snyder Corporation experienced an increase in fixed costs (depreciation). If variable costs and
sales price remain unchanged, what will happen to the contribution margin and the break-even
point?
A) Both will increase
B) Both will decrease
C) Contribution margin will decrease and break-even will increase
D) Contribution margin will be unchanged and the break-even point will increase
E) Contribution margin will increase and break-even will decrease
Correct Answer: D) contribution margin will be unchanged and the break-even point will
increase
Rationale: Contribution Margin is calculated as Sales minus Variable Costs; since neither
changed, the CM remains the same. However, the Break-Even Point = Fixed Costs / Unit
CM. If the numerator (Fixed Costs) increases, the break-even point must also increase.
Question 9
Last month's CVP statement: Sales (10,000 units) $1,200,000; Variable expenses $800,000;
Fixed expenses $240,000. What is the company's break-even sales in units?
A) 4,000 units
B) 6,000 units
C) 8,000 units
D) 5,000 units
E) 7,500 units
Correct Answer: B) 6,000 units
Rationale: Unit Sales Price = $1,200,,000 = $120. Unit Variable Cost = $800,000 /
, 4
10,000 = $80. Unit Contribution Margin = $120 - $80 = $40. Break-even units = Fixed Costs
/ Unit CM = $240,000 / $40 = 6,000 units.
Question 10
A 45% contribution margin ratio means that:
A) 45% of every sales dollar goes to net income
B) Variable costs are 45% of sales
C) 45% of the company's revenue is available to cover fixed costs and to contribute toward
operating income.
D) The company has a 45% markup on its products
E) Fixed costs are 45% of variable costs
Correct Answer: C) 45% of the company's revenue is available to cover fixed costs and to
contribute toward operating income.
Rationale: The CM ratio indicates the percentage of each sales dollar remaining after
variable costs are covered. This remainder is used to pay for fixed expenses; once fixed
expenses are covered, the rest becomes profit.
Question 11
Motel 6 has annual fixed costs of $1.2 million, average daily room rents of $50, and variable
costs of $10 per room. It has 300 rooms and operates 365 days. How much net income is
generated if the motel is completely full all year?
A) $3,180,000
B) $4,380,000
C) $5,475,000
D) $2,980,000
E) 1,200,000
𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐴) 3,180,000
Rationale: Total Revenue = 300 rooms * 365 days * $50 = $5,475,000. Total Variable Cost =
300 * 365 * $10 = $1,095,000. Total Contribution Margin = $5,475,000 - $1,095,000 =
$4,380,000. Net Income = CM - Fixed Costs = $4,380,000 - $1,200,000 = $3,180,000.
Question 12
Brant Company manufactures a part. Costs for 5,000 units: DM $3, DL $5, Var-OH $4, Fixed-
OH $2. Fixed OH is unavoidable. Assuming no other use of facilities, what is the highest price
Brant should pay an outside supplier?
A) $14
B) $8
C) $12
D) $10
E) 9𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐶)12
