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MAS.M-1415.Variable Costing.

MC
MULTIPLE CHOICE QUESTIONS
1. 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 Costing
C. Variable Costing
B. Out-of-pocket costing
D. 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 reporting
C. Does not reflect cost-volume-profit relationships.
D. Overstate inventories
4. Variable costing considers which of the following product costs?
Fixed
Fixed
Variable
Variable
Mfg.
Selling &
Mfg.
Selling &
Costs
Adm.
Costs
Adm.
A.
no
no
yes
no
B.
yes
no
yes
no
C.
no
no
yes
yes
D.
Yes
no
yes
yes
5. Inventory under the variable costing includes
A. 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 be
A. Equal to direct costing net income.
B. Greater than direct costing net income
C. 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.

Materials and direct labor D. Treatment of variable production costs. variable costing net income is lower than absorption costing net income. 12. If all the products manufactured during the period are sold in that period. 9. if sales remain constant from period 1 to period 1. B. Treatment of fixed manufacturing overhead C. When production and sales level are equal. D. no yes yes no no no no no yes yes yes yes yes no yes no 13. Variable production costs are larger in period 2 than period 1 B. 10. Absorption costing income is lower than variable costing income. Arrangement of the income statement. Selling & Costs Adm. A. D. C. unfavorable volume variance means that Actual output was less than the level used to set the standard fixed cost.Absorption costing differs from variable costing in all of the following except A. Normal costing differs from actual costing in treating A. Costs Adm. Overhead. 8.The variable costing method ordinarily includes in product costs the following: . and overhead C. Period 1 production exceeds period 2 production D. D.Under absorption costing. Fixed production costs are larger in period 2 than period 1 11. C. Cost control was probably poor. variable costing net income is equal to absorption costing net income.Variable costing considers which of the following to be product costs? Fixed Fixed Variable Variable Mfg. Period 2 production exceeds period 1 production C. Direct labor and overhead B. Acceptability for external repoting B. the company will report a larger income in period 2 when A. An A. Materials. D. Selling & Mfg. direct labor. Actual output was more than the level used to set the standard fixed cost.C. B.

000 B.000 Direct labor 100. and sold 21. 0 D.000 units.000 units.A.000 units to set its standard costs.000 Selling and administrative cost . Some other number.000 units. Variable production costs are P20 and fixed production costs are P300. Direct materials cost. produced 22. B.000 units to set its standard costs.000 C. D. Rounder uses a normal activity of 20. Direct materials cost.Net income determined using full absorption costing can be reconciled to net income determined using variable costing by computing the difference between them. The excerpt presented below was taken from Smurf Company’s records for the fiscal year ended November 30: Direct materials used P300. Inventoried discretionary costs in the beginning and ending inventory.000. The volume variance under absorption costing would be A. Gross margin (absorption costing method) and contribution margin (variable costing method). Question 17 and 18 are based on the following information.000 C. and variable manufacturing overhead cost. P420. Sales as recorded under the variable costing method and sales as recorded under the absorption costing method. P400. 14. Rounder began the year with no inventory.variable 40. A. B.Tacloban Industries manufactures a single product.000 B. C. D. 15.000 units. direct labor cost. P735. Some other number 16.000 Variable factory overhead 50. direct labor cost.000. The standard cost of goods sold under variable costing would be A. Variable production costs are P20 and fixed production costs are P300.Samar Industries manufactures a single product. Rounder uses a normal activity of 20. Prime cost but not conversion cost. and sold 21. P20. P30.000 D. C. produced 22. but no manufacturing overhead cost.000 . Rounder began the year with no inventory.000 Selling and administrative cost – fixed 20.000 Fixed factory overhead 80. Fixed manufacturing overhead costs deferred in or released from inventories. Prime cost and all conversion cost.

Compute for the inventory under the direct costing method using the data given: units unsold at the end of the period 45.00 B. P 0 P 180.7 million Per unit variable cost .90 D. Total fixed costs. 450. variable overhead per unit. raw materials used. direct labor.20 D. P11.45 C.000 Under absorption costing.00 per unit. 590.000 C. 450.000 B. inventoriable costs are A.2 million Selling and administrative P 0.LY & Company completed its first year of operations during which time the following information were generated: Total units produced 100. P2.05 C. P6. Bucayao Corporation had incurred costs as follows: Direct Materials P 200.17. indirect labor for the month.000 Fixed 90.00 per unit.000.750. P530.000 Total P 615.500. P16. A. the inventoriable costs for the current fiscal year are A.000 Direct labor used 135. how should these costs be classified? Period Cost Product Cost A. P67. P 80. 490. P19.90 per unit. P 2.With a production of 200. P 3. P 2.000.000 D. P400. beginning.000 Fixed 85.000 19.000 P 100.15 20.000 D. P 100. 530. P 2.000 P 0 21.000 B.Care Company’s 2013 fixed manufacturing overhead cost totaled P100.25 22. 400.Using absorption (full) costing.000 D. raw materials inventory. P 180. P5.000 Manufacturing overhead: Variable 75. the unit cost of product A was: A.If Smurf Company uses variable costing. P17.000 18.000 P 80.000 and variable seliing costs totaled P80.000 C.50 B.000 Selling and administrative expenses: Variable 30.000 units of product A during the month of June. P33.000 Total units sold 80.000 at 100 per unit Work in process ending inventory cost Fixed cost Factory Overhead P 1.000 B. Under direct costing.000 C.00 per unit. P3.

Inc.The ending finished goods inventory under absorption costing would be: A.00 If the company used the variable (direct) costing method.000 units.280 C. P 2. 2013 operations.000 per quarter Normal capacity is 20.50 Selling and administrative 10.CERTS for life.The net income for the month under the variable costing method would be: A.320 B.000 units and sales volume was 16.968 D P 16.500 .000 Manufacturing overhead: Fixed 36..00 Direct labor 12. P 14.000.000 C. the operating income would be A. showed the following figures relating to product A: Beginning inventory-FG and WIP none No. The absorption costing profit for the quarter was: A. P 970.000 Direct materials 59. of units sold at 15 32. P 22. Production in the first quarter was 19. P 32.200 Direct labor 48.Raw materials P 20.000 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. P 950.000 D.000 No.420 C. P 920.100. manufactures a single product for which the costs and selling prices are: Variable production costs P 50 per unit Selling price P 125 per unit Fixed production overhead P 200. P 960.080 Variable 24. P 25.000 Marketing and general expenses: Fixed 11.000 23. No opening inventory for the quarter.200 units Beginning inventory none 24. The books of Mariposa Company pertaining to the year ended December 31.000 B.500 D.50 Factory Overhead 7.000 C. P 2. P 3.096 B.000 Variable 5% of sales Production in units 3. of units produced 40.000 D.040. P 4. P 16.000 B.000 units per quarter.480.420 Questions 26 and 27 are based on the following information. P 23. P 12.000 per quarter Fixed selling and administrative overhead P 80.072 25.500 Direct materials used P 177.

00 variable and P50.000 31. 9 Manufacturing overhead. reported the following data for 2013: Actual hours 120.250 B. P 30.500 Fixed admin expenses P 30. variable or absorption costing.00 C.Vladen Inc.000 Fixed predetermined overhead rate P 6 per hour . Variable by P 20.000 30. P 200. What would be the effect in net income if absorption costing is used instead of variable costing? A.000 units of product A.000 Variable costs per unit: Direct material.000 higher B. P 87.00 B. P 81.000 lower D.000 29. P 270.000 C. Good Health Corporation manufactured 70. There was no beginning inventory. Manufacturing cost per unit was P20. P 70. P 49. P 58. Profit is P 100.Under variable costing.Based on absorption costing. 2013? A. what amount of period costs will P Co. a new product. Only 65. 3 SG&A. the Cost of Goods Manufactured for P Co.Direct labor used P 85.000 Fixed P 110.000 B.000 lower C. P 60.625 C.250 28.000. absorption by P 26. P 70. P 210.000 units were sold during the year. Profit is P 250.000 C.000 SG&A. variable by P 26. P 300.000 Units sold. 30.625 D.Which costing method.000 Variable 61.000 D.75 27.000 D. Deduct? A.Based on absorption costing.218.375. 7. would show a higher operating income for 2013 and by how much? A. Absorption by P 20. what would be the finished goods inventory as at December 31. 4 Fixed costs: Manufacturing overhead. 10.During the year 2013.’s financial records for its first year of operations: Units produced. Use the following information for questions 29 and 30: The following information has been extracted from P Co. P 8 Direct labor.000 B.500_ P 171.00 fixed.000 Denominator hours 150. P 79.750. None of the above.000 26. Profit is P250.00 D.’s first year would be A.000 Standard hours allowed for output 140.

Selling price D. Cannot be determined without further information 33.Variable predetermined Over Head rate TYD’s 2012 volume variance: A. P 60.000 32.000. P 60. has total budgeted fixed costs of P150.560 C.500 B. What normal capacity was used to determine the fixed overhead rate? A. P 33.000 D. unit variable manufacturing costs. P 60. unit production B.000 which is neither favorable nor underapplied underapplied P 4 per hour C. P 37.000 favorable volume variance. Unit sales C.Calculating income under variable costing does NOT require knowing A. P 40. Actual production of 39.000 units resulted in a P 6.Eastern Co. . No volume variance favorable B.000 D.