FAC FAC Managerial Accounting & Cost Concepts 1 — Questions and Answers
Question 1: What is the term for costs that change in total in direct proportion to changes in the level of production activity?
- Fixed costs
- Variable costs (Correct answer)
- Sunk costs
- Opportunity costs
Correct answer: Variable costs
Variable costs change in total in direct proportion to changes in activity level, such as raw materials increasing as more units are produced.
Question 2: What is the break-even point in units when fixed costs are $50,000, selling price per unit is $25, and variable cost per unit is $15?
- 2,000 units
- 3,333 units
- 5,000 units (Correct answer)
- 10,000 units
Correct answer: 5,000 units
Break-even units = Fixed costs ÷ Contribution margin per unit = $50,000 ÷ ($25 − $15) = 5,000 units.
Question 3: Which of the following is a period cost rather than a product cost?
- Direct materials
- Manufacturing overhead
- Selling expenses (Correct answer)
- Direct labor
Correct answer: Selling expenses
Selling expenses are period costs expensed in the period incurred and are not included in the cost of inventory.
Question 4: What does the contribution margin ratio represent?
- Net income divided by sales
- Gross profit divided by sales
- Contribution margin divided by sales (Correct answer)
- Operating income divided by sales
Correct answer: Contribution margin divided by sales
The contribution margin ratio equals contribution margin divided by sales revenue, showing the percentage of each dollar that covers fixed costs and profit.
Question 5: In job order costing, which document accumulates all costs assigned to a specific production job?
- Materials requisition form
- Job cost sheet (Correct answer)
- Production budget
- Bill of materials
Correct answer: Job cost sheet
A job cost sheet tracks direct materials, direct labor, and applied manufacturing overhead for each individual job.
Question 6: Which costing method assigns manufacturing overhead to products using multiple activity-based cost drivers?
- Traditional costing
- Process costing
- Activity-based costing (Correct answer)
- Absorption costing
Correct answer: Activity-based costing
Activity-based costing (ABC) identifies specific activities and assigns overhead costs to products based on actual consumption of each activity.
FAC FAC Managerial Accounting & Cost Concepts 1
What is the term for costs that change in total in direct proportion to changes in the level of production activity?