MAS.M-1415.Variable Costing.MCMULTIPLE CHOICE QUESTIONS1. In absorption costing, as contrasted with direct costing, the following are absorbed into inventory.A. Only the variable manufacturing overhead.B. All the elements of fixed and variable manufacturing overhead.C. Only the fixed manufacturing overhead.D. Neither fixed nor variable manufacturing overhead.

2. Which of the following is a term more descriptive of the type of cost accounting often called direct costing.A. Relevant CostingC. Variable CostingB. Out-of-pocket costingD. Prime Costing

3. A criticism of variable costing for managerial accounting purpose is that it.A. Might encourage managers to emphasize the short term at the expense of the long term.B. Is not acceptable for product line segmented reportingC. Does not reflect cost-volume-profit relationships.D. Overstate inventories

4. Variable costing considers which of the following product costs?FixedFixedVariableVariable Mfg. Selling & Mfg. Selling &CostsAdm. Costs Adm.A. nonoyesnoB. yesnoyesnoC. nonoyesyesD. Yesnoyesyes

5. Inventory under the variable costing includesA. Direct materials cost, direct labor cost, but no factory overhead cost.B. Direct materials cost, direct labor cost, and variable factory overhead.C. Prime cost but not conversion cost.D. Prime cost and all conversion cost.

6. If production is greater than sales (units), then absorption costing net income will generally beA. Equal to direct costing net income.B. Greater than direct costing net incomeC. Less than direct costing net income.D. Additional data is needed to be able to answer.7. Which of the following statements is correct? A. When production is lower than sales, variable costing net income is lower than absorption costing net income.B. When production is higher than sales, absorption costing net income is lower than variable costing net income.C. If all the products manufactured during the period are sold in that period, variable costing net income is equal to absorption costing net income.D. When production and sales level are equal, variable costing net income is lower than absorption costing net income.

8. An unfavorable volume variance means thatA. Actual output was less than the level used to set the standard fixed cost.B. Cost control was probably poor.C. Absorption costing income is lower than variable costing income.D. Actual output was more than the level used to set the standard fixed cost.

9. Normal costing differs from actual costing in treatingA. Direct labor and overheadB. Materials, direct labor, and overheadC. Materials and direct laborD. Overhead.

10. Under absorption costing, if sales remain constant from period 1 to period 1, the company will report a larger income in period 2 whenA. Variable production costs are larger in period 2 than period 1B. Period 2 production exceeds period 1 productionC. Period 1 production exceeds period 2 productionD. Fixed production costs are larger in period 2 than period 1

11. Absorption costing differs from variable costing in all of the following exceptA. Acceptability for external repotingB. Treatment of fixed manufacturing overheadC. Treatment of variable production costs.D. Arrangement of the income statement.

12. Variable costing considers which of the following to be product costs?FixedFixedVariableVariable Mfg. Selling & Mfg. Selling &CostsAdm. Costs Adm.A. nonoyesyesB. yesnoyesnoC. yesnoyesyesD. nonoyesno

13. The variable costing method ordinarily includes in product costs the following:A. Prime cost but not conversion cost.B. Direct materials cost, direct labor cost, but no manufacturing overhead cost.C. Direct materials cost, direct labor cost, and variable manufacturing overhead cost.D. Prime cost and all conversion cost.

14. Net income determined using full absorption costing can be reconciled to net income determined using variable costing by computing the difference between them.A. Gross margin (absorption costing method) and contribution margin (variable costing method).B. Fixed manufacturing overhead costs deferred in or released from inventories.C. Inventoried discretionary costs in the beginning and ending inventory.D. Sales as recorded under the variable costing method and sales as recorded under the absorption costing method.

15. Samar Industries manufactures a single product. Variable production costs are P20 and fixed production costs are P300,000. Rounder uses a normal activity of 20,000 units to set its standard costs. Rounder began the year with no inventory, produced 22,000 units, and sold 21,000 units. The volume variance under absorption costing would beA. P20,000B. P30,000C. 0D. Some other number

16. Tacloban Industries manufactures a single product. Variable production costs are P20 and fixed production costs are P300,000. Rounder uses a normal activity of 20,000 units to set its standard costs. Rounder began the year with no inventory, produced 22,000 units, and sold 21,000 units. The standard cost of goods sold under variable costing would beA. P735,000B. P400,000C. P420,000D. Some other number.

Question 17 and 18 are based on the following information. The excerpt presented below was taken from Smurf Companys records for the fiscal year ended November 30:Direct materials usedP300,000Direct labor 100,000Variable factory overhead 50,000Fixed factory overhead 80,000Selling and administrative cost - variable 40,000Selling and administrative cost fixed 20,000

17. If Smurf Company uses variable costing, the inventoriable costs for the current fiscal year areA. 530,000C. 450,000B. 400,000D. 490,000

18. Using absorption (full) costing, inventoriable costs areA. P530,000C. 450,000B. P400,000 D. 590,000

19. Compute for the inventory under the direct costing method using the data given: units unsold at the end of the period 45,000; raw materials used, P6.00 per unit; raw materials inventory, beginning, P5.90 per unit; direct labor, P3.00 per unit; variable overhead per unit, P2.00 per unit; indirect labor for the month, P33,750. Total fixed costs, P67,500.A. P17.45C. P11.00B. P16.90D. P19.15

20. Care Companys 2013 fixed manufacturing overhead cost totaled P100,000 and variable seliing costs totaled P80,000. Under direct costing, how should these costs be classified?Period CostProduct CostA. P 0P 180,000B. P 80,000P 100,000C. P 100,000P 80,000D. P 180,000P 021. With a production of 200,000 units of product A during the month of June, Bucayao Corporation had incurred costs as follows:Direct MaterialsP 200,000Direct labor used 135,000Manufacturing overhead:Variable 75,000Fixed 90,000Selling and administrative expenses:Variable 30,000Fixed 85,000TotalP 615,000Under absorption costing, the unit cost of product A was:A. P 2.05C. P 2.50B. P 2.20D. P 3.25

22. LY & Company completed its first year of operations during which time the following information were generated:Total units produced100,000Total units sold80,000 at 100 per unit Work in process ending inventory costFixed cost Factory OverheadP 1.2 millionSelling and administrativeP 0.7 million Per unit variable costRaw materialsP 20.00Direct labor 12.50Factory Overhead 7.50 Selling and administrative 10.00If the company used the variable (direct) costing method, the operating income would beA. P 3,040,000C. P 4,000,000B. P 2,100,000D. P 2,480,000

23. CERTS for life, Inc., manufactures a single product for which the costs and selling prices are:Variable production costsP 50 per unitSelling priceP 125 per unitFixed production overheadP 200,000 per quarterFixed selling and administrative overheadP 80,000 per quarterNormal capacity is 20,000 units per quarter. Production in the first quarter was 19,000 units and sales volume was 16,000 units. No opening inventory for the quarter. The absorption costing profit for the quarter was:A. P 920,000C. P 960,000B. P 950,000D. P 970,000

Questions 24 and 25 are based on the following information: The following operating data are available from the records of Sheena Company for the month of January 2013:Sales (P70 per unit)P 210,000Direct materials 59,200Direct labor 48,000Manufacturing overhead:Fixed 36,080Variable 24,000Marketing and general expenses:Fixed 11,000Variable 5% of sales Production in units3,200 units Beginning inventorynone24. The ending finished goods inventory under absorption costing would be:A. P 14,280C. P 12,096B. P 16,968D P 16,072

25. The net income for the month under the variable costing method would be:A. P 32,420C. P 23,320B. P 25,500D. P 22,420

Questions 26 and 27 are based on the following information. The books of Mariposa Company pertaining to the year ended December 31, 2013 operations, showed the following figures relating to product A:Beginning inventory-FG and WIPnoneNo. of units produced40,000No. of units sold at 1532,500Direct materials usedP 177,500Direct labor usedP 85,000FixedP 110,000Variable 61,500_ P 171,500Fixed admin expensesP 30,00026. Under variable costing, what would be the finished goods inventory as at December 31, 2013?A. P 81,375.00C. P 87,000.00B. P 60,750.00D. P 49,218.75

27. Which costing method, variable or absorption costing, would show a higher operating income for 2013 and by how much?A. Variable by P 20,625C. variable by P 26,250B. Absorption by P 20,625D. absorption by P 26,250

28. During the year 2013, Good Health Corporation manufactured 70,000 units of product A, a new product. Only 65,000 units were sold during the year. There was no beginning inventory. Manufacturing cost per unit was P20.00 variable and P50.00 fixed. What would be the effect in net income if absorption costing is used instead of variable costing?A. Profit is P 100,000 lowerC. Profit is P250,000 higherB. Profit is P 250,000 lowerD. None of the above.

Use the following information for questions 29 and 30: The following information has been extracted from P Co.s financial records for its first year of operations:Units produced, 10,000Units sold, 7,000Variable costs per unit:Direct material, P 8Direct labor, 9Manufacturing overhead, 3SG&A, 4Fixed costs:Manufacturing overhead, P 70,000SG&A, 30,000

29. Based on absorption costing, the Cost of Goods Manufactured for P Co.s first year would beA. P 200,000C. P 300,000B. P 270,000D. P 210,000

30. Based on absorption costing, what amount of period costs will P Co. Deduct?A. P 70,000C. P 30,000B. P 79,000D. P 58,000

31. Vladen Inc. reported the following data for 2013:Actual hours120,000Denominator hours150,000Standard hours allowed for output140,000Fixed predetermined overhead rateP 6 per hourVariable predetermined Over Head rateP 4 per hour

TYDs 2012 volume variance:A. No volume varianceC. P 60,000 favorableB. P 60,000 which is neither favorable nor underappliedD. P 60,000 underapplied

32. Eastern Co. has total budgeted fixed costs of P150,000. Actual production of 39,000 units resulted in a P 6,000 favorable volume variance. What normal capacity was used to determine the fixed overhead rate?A. P 40,560C. P 37,500B. P 33,000D. Cannot be determined without further information

33. Calculating income under variable costing does NOT require knowingA. Unit salesC. unit productionB. Selling priceD. unit variable manufacturing costs.