ACC 406 MIDTERM EXAM QUESTIONS
AND CORRECT ANSWERS. VERIFIED
2025/2026.
Calculating Total Product Cost - ANS Direct Materials + Direct Labour + Manufacturing
Overhead
Calculating Unit Product Costs - ANS Total Product Cost/Number of units produced
Calculating Prime Costs - ANS Direct Materials + Direct Labour
Calculating Conversion Costs - ANS Direct Labour + Manufacturing Overhead
Calculating Gross Margin Percentage - ANS Gross Margin/Sales Revenue
Calculating Operating Income - ANS Gross Margin - Selling and Administrative Expenses
Service Operations - ANS No product to purchase or to manufacture
Cost of Goods Manufactured (COGM) - ANS The total cost of making products that are
available for sale during the period
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Gross Margin - ANS Difference between sales revenue and cost of goods sold (COGS)
Cost Behaviour - ANS Describes whether a cost change when the level of activity changes. It
is the foundation upon which managerial accounting is built and is essential to planning,
controlling, and decision making.
Fixed Costs - ANS Cost that does not change in total as activity changes
Discretionary Fixed Costs - ANS Costs that can be changed or avoided relatively easily at
management's discretion
Committed Fixed Costs - ANS Costs that cannot be easily changed; these often involve a long-
term contract
Variable Costs - ANS Costs that vary in direct proportion to changes in output within the
relevant range
Total Variable Cost - ANS Variable Rate Per Unit x Units of Output
Mixed Costs - ANS Costs that have both a fixed and a variable component
High Low Method - ANS Method of separating mixed costs into fixed and variable
components by using just the high and low data points
Using the High Low Method - ANS 1. Find high point and low point for the activity or output
level
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
AND CORRECT ANSWERS. VERIFIED
2025/2026.
Calculating Total Product Cost - ANS Direct Materials + Direct Labour + Manufacturing
Overhead
Calculating Unit Product Costs - ANS Total Product Cost/Number of units produced
Calculating Prime Costs - ANS Direct Materials + Direct Labour
Calculating Conversion Costs - ANS Direct Labour + Manufacturing Overhead
Calculating Gross Margin Percentage - ANS Gross Margin/Sales Revenue
Calculating Operating Income - ANS Gross Margin - Selling and Administrative Expenses
Service Operations - ANS No product to purchase or to manufacture
Cost of Goods Manufactured (COGM) - ANS The total cost of making products that are
available for sale during the period
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Gross Margin - ANS Difference between sales revenue and cost of goods sold (COGS)
Cost Behaviour - ANS Describes whether a cost change when the level of activity changes. It
is the foundation upon which managerial accounting is built and is essential to planning,
controlling, and decision making.
Fixed Costs - ANS Cost that does not change in total as activity changes
Discretionary Fixed Costs - ANS Costs that can be changed or avoided relatively easily at
management's discretion
Committed Fixed Costs - ANS Costs that cannot be easily changed; these often involve a long-
term contract
Variable Costs - ANS Costs that vary in direct proportion to changes in output within the
relevant range
Total Variable Cost - ANS Variable Rate Per Unit x Units of Output
Mixed Costs - ANS Costs that have both a fixed and a variable component
High Low Method - ANS Method of separating mixed costs into fixed and variable
components by using just the high and low data points
Using the High Low Method - ANS 1. Find high point and low point for the activity or output
level
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
