ACCT 526 Final Exam: Advanced Managerial Accounting – Cost Behavior, CVP, Budgeting, Variance
Analysis, Decentralization, Transfer Pricing, Relevant Costs, Balanced Scorecard – ULL 2026 Updated
Questions 1–150 with Answers & Explanations
1. Which of the following is true regarding fixed costs per unit?
A) Increases as activity decreases
B) Decreases as activity decreases
C) Remains constant
D) Increases as activity increases
Answer: A
Explanation: Fixed cost per unit increases when activity decreases because the same total cost is spread
over fewer units.
2. Variable costs in total:
A) Remain constant regardless of activity
B) Change in proportion to changes in activity
C) Decrease per unit as activity increases
D) Are always less than fixed costs
Answer: B
Explanation: Total variable cost increases or decreases directly with activity level.
3. The relevant range concept is important because:
A) Within this range, cost behavior assumptions are valid
B) Outside this range, costs become irrelevant
C) Fixed costs become variable
D) Variable costs become fixed
Answer: A
Explanation: Cost behavior patterns (fixed/variable) hold only within the relevant range.
**4. Contribution margin ratio = 0.30. If sales increase by 10, 000, netincomeincreasesby : ∗ ∗ A)
3,000
B) 7, 000C)10,000
D) $0
Answer: A
*Explanation: Change in NI = Change in Sales × CM Ratio = 10, 000 × 0.30 =3,000.*
5. Break-even point in sales dollars = Fixed costs / ?
A) CM per unit
B) CM ratio
,C) Variable cost ratio
D) Sales price per unit
Answer: B
Explanation: BEP ($) = Fixed Costs ÷ Contribution Margin Ratio.
6. A product sells for 100, variablecost60, fixed costs $200,000. Units to break even?
A) 2,000
B) 3,333
C) 5,000
D) 10,000
Answer: C
*Explanation: CM = 40;200,000 ÷ $40 = 5,000 units.*
7. If a company has a margin of safety of 50, 000andactualsalesof 250,000, break-even sales = ?
A) 50, 000B)200,000
C) 250, 000D)300,000
Answer: B
*Explanation: MOS = Actual Sales – BEP Sales; 50, 000 =250,000 – BEP; BEP = $200,000.*
8. High operating leverage means:
A) Small change in sales leads to large change in net income
B) Large change in sales leads to small change in net income
C) Fixed costs are low
D) Variable costs are high
Answer: A
Explanation: High fixed costs magnify profit changes with sales fluctuations.
9. Absorption costing vs. variable costing: When production > sales, absorption income is:
A) Higher
B) Lower
C) Equal
D) Not comparable
Answer: A
Explanation: Some fixed overhead is deferred in inventory under absorption, increasing reported income.
10. Variable costing treats which cost as period cost?
A) Direct materials
B) Direct labor
C) Variable manufacturing overhead
D) Fixed manufacturing overhead
Answer: D
Explanation: Under variable costing, only variable production costs are product costs; fixed MOH is period
, cost.
11. The high-low method uses which two data points?
A) Highest and lowest cost
B) Highest and lowest activity
C) Highest cost and lowest activity
D) Random points
Answer: B
Explanation: High-low uses the activity levels (not costs) to determine variable cost per unit.
12. Which of the following is a mixed cost?
A) Rent
B) Sales commissions (flat salary + % of sales)
C) Direct materials
D) Insurance
Answer: B
Explanation: Mixed costs have both fixed and variable components (e.g., salary + commission).
13. CVP analysis assumes that selling price:
A) Changes with volume
B) Is constant
C) Depends on fixed costs
D) Varies per unit
Answer: B
Explanation: CVP assumes constant selling price per unit.
14. To compute target profit in sales dollars: (Fixed costs + Target profit) ÷ ?
A) CM per unit
B) CM ratio
C) Variable cost per unit
D) Sales price
Answer: B
Explanation: Target sales ($) = (Fixed Costs + Target Profit) ÷ CM Ratio.
15. Fixed costs 300, 000, CMperunit50, target profit $100,000. Required units = ?
A) 6,000
B) 8,000
C) 10,000
D) 20,000
Answer: B
*Explanation: (300, 000+100,000) ÷ $50 = 8,000 units.*
16. Which cost estimation method uses statistical analysis?
A) High-low
Analysis, Decentralization, Transfer Pricing, Relevant Costs, Balanced Scorecard – ULL 2026 Updated
Questions 1–150 with Answers & Explanations
1. Which of the following is true regarding fixed costs per unit?
A) Increases as activity decreases
B) Decreases as activity decreases
C) Remains constant
D) Increases as activity increases
Answer: A
Explanation: Fixed cost per unit increases when activity decreases because the same total cost is spread
over fewer units.
2. Variable costs in total:
A) Remain constant regardless of activity
B) Change in proportion to changes in activity
C) Decrease per unit as activity increases
D) Are always less than fixed costs
Answer: B
Explanation: Total variable cost increases or decreases directly with activity level.
3. The relevant range concept is important because:
A) Within this range, cost behavior assumptions are valid
B) Outside this range, costs become irrelevant
C) Fixed costs become variable
D) Variable costs become fixed
Answer: A
Explanation: Cost behavior patterns (fixed/variable) hold only within the relevant range.
**4. Contribution margin ratio = 0.30. If sales increase by 10, 000, netincomeincreasesby : ∗ ∗ A)
3,000
B) 7, 000C)10,000
D) $0
Answer: A
*Explanation: Change in NI = Change in Sales × CM Ratio = 10, 000 × 0.30 =3,000.*
5. Break-even point in sales dollars = Fixed costs / ?
A) CM per unit
B) CM ratio
,C) Variable cost ratio
D) Sales price per unit
Answer: B
Explanation: BEP ($) = Fixed Costs ÷ Contribution Margin Ratio.
6. A product sells for 100, variablecost60, fixed costs $200,000. Units to break even?
A) 2,000
B) 3,333
C) 5,000
D) 10,000
Answer: C
*Explanation: CM = 40;200,000 ÷ $40 = 5,000 units.*
7. If a company has a margin of safety of 50, 000andactualsalesof 250,000, break-even sales = ?
A) 50, 000B)200,000
C) 250, 000D)300,000
Answer: B
*Explanation: MOS = Actual Sales – BEP Sales; 50, 000 =250,000 – BEP; BEP = $200,000.*
8. High operating leverage means:
A) Small change in sales leads to large change in net income
B) Large change in sales leads to small change in net income
C) Fixed costs are low
D) Variable costs are high
Answer: A
Explanation: High fixed costs magnify profit changes with sales fluctuations.
9. Absorption costing vs. variable costing: When production > sales, absorption income is:
A) Higher
B) Lower
C) Equal
D) Not comparable
Answer: A
Explanation: Some fixed overhead is deferred in inventory under absorption, increasing reported income.
10. Variable costing treats which cost as period cost?
A) Direct materials
B) Direct labor
C) Variable manufacturing overhead
D) Fixed manufacturing overhead
Answer: D
Explanation: Under variable costing, only variable production costs are product costs; fixed MOH is period
, cost.
11. The high-low method uses which two data points?
A) Highest and lowest cost
B) Highest and lowest activity
C) Highest cost and lowest activity
D) Random points
Answer: B
Explanation: High-low uses the activity levels (not costs) to determine variable cost per unit.
12. Which of the following is a mixed cost?
A) Rent
B) Sales commissions (flat salary + % of sales)
C) Direct materials
D) Insurance
Answer: B
Explanation: Mixed costs have both fixed and variable components (e.g., salary + commission).
13. CVP analysis assumes that selling price:
A) Changes with volume
B) Is constant
C) Depends on fixed costs
D) Varies per unit
Answer: B
Explanation: CVP assumes constant selling price per unit.
14. To compute target profit in sales dollars: (Fixed costs + Target profit) ÷ ?
A) CM per unit
B) CM ratio
C) Variable cost per unit
D) Sales price
Answer: B
Explanation: Target sales ($) = (Fixed Costs + Target Profit) ÷ CM Ratio.
15. Fixed costs 300, 000, CMperunit50, target profit $100,000. Required units = ?
A) 6,000
B) 8,000
C) 10,000
D) 20,000
Answer: B
*Explanation: (300, 000+100,000) ÷ $50 = 8,000 units.*
16. Which cost estimation method uses statistical analysis?
A) High-low
