Principles of Financial and Managerial Accounting
(D196) - Exam 3 Comprehensive Prep Verified and
Latest Questions and Answers
1. Which of the following best describes a mixed cost?
A. A cost that remains constant in total regardless of activity levels.
B. A cost that is incurred only when production exceeds a certain threshold.
C. A cost that changes in direct proportion to changes in activity.
D. A cost that contains both fixed and variable components.
Answer: D
Explanation: Mixed costs have both a fixed component (base cost) and a variable
component (cost per unit of activity).
2. How is the contribution margin per unit calculated?
A. Total Sales minus Total Fixed Costs.
B. Gross Profit minus Operating Expenses.
C. Sales Price per Unit minus Variable Cost per Unit.
D. Net Income divided by Number of Units Sold.
Answer: C
Explanation: Contribution margin per unit is determined by subtracting the variable cost
per unit from the selling price per unit.
,3. In a CVP (Cost-Volume-Profit) graph, what does the point where the total
sales line intersects the total cost line represent?
A. The maximum profit point.
B. The margin of safety.
C. The variable cost threshold.
D. The break-even point.
Answer: D
Explanation: The break-even point is where total revenue equals total costs, resulting in
zero profit or loss.
4. Which of the following is considered a product cost under GAAP?
A. Sales commissions.
B. Advertising expenses.
C. CEO salary.
D. Direct materials.
Answer: D
Explanation: Product costs include direct materials, direct labor, and manufacturing
overhead; sales and admin costs are period costs.
5. What happens to the break-even point in units if the selling price per unit
increases while costs remain constant?
A. The break-even point increases.
B. The break-even point remains unchanged.
C. The break-even point decreases.
D. The effect cannot be determined.
Answer: C
Explanation: An increase in selling price increases the contribution margin per unit,
meaning fewer units are needed to cover fixed costs.
, 6. Which budget is typically prepared first in the master budgeting process?
A. Production budget.
B. Sales budget.
C. Cash budget.
D. Direct materials budget.
Answer: B
Explanation: The sales budget is the foundation of the master budget because production
and expenses depend on forecasted sales.
7. What is the primary difference between job order costing and process
costing?
A. Job order costing tracks costs by specific batch; process costing tracks costs by department.
B. Job order costing is for mass-produced items; process costing is for unique items.
C. Process costing is only used in service industries.
D. Job order costing does not include manufacturing overhead.
Answer: A
Explanation: Job order costing is used for unique, custom products (batches), while
process costing is for continuous production of homogeneous units.
8. A company has fixed costs of $100,000 and a contribution margin ratio of
40%. What is the break-even point in sales dollars?
A. $250,000
B. $40,000
C. $140,000
D. $200,000
Answer: A
Explanation: Break-even in sales dollars = Fixed Costs / Contribution Margin Ratio
($100,.40 = $250,000).
(D196) - Exam 3 Comprehensive Prep Verified and
Latest Questions and Answers
1. Which of the following best describes a mixed cost?
A. A cost that remains constant in total regardless of activity levels.
B. A cost that is incurred only when production exceeds a certain threshold.
C. A cost that changes in direct proportion to changes in activity.
D. A cost that contains both fixed and variable components.
Answer: D
Explanation: Mixed costs have both a fixed component (base cost) and a variable
component (cost per unit of activity).
2. How is the contribution margin per unit calculated?
A. Total Sales minus Total Fixed Costs.
B. Gross Profit minus Operating Expenses.
C. Sales Price per Unit minus Variable Cost per Unit.
D. Net Income divided by Number of Units Sold.
Answer: C
Explanation: Contribution margin per unit is determined by subtracting the variable cost
per unit from the selling price per unit.
,3. In a CVP (Cost-Volume-Profit) graph, what does the point where the total
sales line intersects the total cost line represent?
A. The maximum profit point.
B. The margin of safety.
C. The variable cost threshold.
D. The break-even point.
Answer: D
Explanation: The break-even point is where total revenue equals total costs, resulting in
zero profit or loss.
4. Which of the following is considered a product cost under GAAP?
A. Sales commissions.
B. Advertising expenses.
C. CEO salary.
D. Direct materials.
Answer: D
Explanation: Product costs include direct materials, direct labor, and manufacturing
overhead; sales and admin costs are period costs.
5. What happens to the break-even point in units if the selling price per unit
increases while costs remain constant?
A. The break-even point increases.
B. The break-even point remains unchanged.
C. The break-even point decreases.
D. The effect cannot be determined.
Answer: C
Explanation: An increase in selling price increases the contribution margin per unit,
meaning fewer units are needed to cover fixed costs.
, 6. Which budget is typically prepared first in the master budgeting process?
A. Production budget.
B. Sales budget.
C. Cash budget.
D. Direct materials budget.
Answer: B
Explanation: The sales budget is the foundation of the master budget because production
and expenses depend on forecasted sales.
7. What is the primary difference between job order costing and process
costing?
A. Job order costing tracks costs by specific batch; process costing tracks costs by department.
B. Job order costing is for mass-produced items; process costing is for unique items.
C. Process costing is only used in service industries.
D. Job order costing does not include manufacturing overhead.
Answer: A
Explanation: Job order costing is used for unique, custom products (batches), while
process costing is for continuous production of homogeneous units.
8. A company has fixed costs of $100,000 and a contribution margin ratio of
40%. What is the break-even point in sales dollars?
A. $250,000
B. $40,000
C. $140,000
D. $200,000
Answer: A
Explanation: Break-even in sales dollars = Fixed Costs / Contribution Margin Ratio
($100,.40 = $250,000).
