1.
Under variable costing, fixed manufacturing
overhead is:
A) carried in a liability account.
B) carried in an asset account.
C) ignored.
D) immediately expensed as a period
cost.
2. In an income statement prepared using the
variable costing method, fixed selling and
administrative expenses would:
A) be used in the computation of the
contribution margin.
B) be used in the computation of net
operating income but not in the
computation of the contribution
margin.
C) be treated the same as variable
manufacturing expenses.
D) not be used.
3. If production is less than sales (in units), then
absorption costing net income will generally
be
A) Greater than variable costing net
income
B) Less than variable costing net income
C) Equal to variable costing net income
D) Less than expected
4. The type of costing that provides the best
information for breakeven analysis is:
A) job-order costing.
B) variable costing.
C) process costing.
D) absorption costing.
5. Advocates of variable costing argue that:
A) fixed production costs should be
added to inventory because such
costs have future service potential
and therefore are inventoriable as an
asset.
B) fixed production costs should be
capitalized as an asset and amortized
over future periods when benefits
from such costs are expected to be
received.
C) fixed production costs should be
charged to the period in which they
are incurred unless sales do not equal
production in which case any
difference should be capitalized as an
asset and amortized over future
periods.
D) fixed production costs should be
charged to the period in which they
are incurred.
6. Net income computed using absorption
costing can be reconciled to net income
computed using variable costing by
computing the difference between
A) The gross profit under absorption
costing and contribution margin
under variable costing
B) The product costs per unit under the
two costing methods
C) Inventoried fixed factory overhead
costs in the beginning and ending
finished goods inventory
D) The selling prices under the two
costing methods
7. On the variable costing income statement, the
difference between the “contribution margin”
and “income before income tax” is equal to
A) The total operating expenses
B) The total fixed cost
C) Fixed selling and administrative
expenses
D) The total variable cost
8. Which condition would cause absorption-
costing net income to be greater than
variable-costing net income?
A) Units sold exceeds units produced
B) Units sold equaled units produced
C) Units sold were less than units
produced
D) Sales price decreased
E) Selling expense increased
9. Which is least likely to be true about
throughput costing?
A) It eliminates the incentive to produce
excess inventory by spreading the
 committed resource costs across
more units.
B) Non-throughput costs are expensed
as period costs
C) Maximizes the cost of the ending
inventory
D) The total COGS is equal to the total
cost of materials placed in process.
10. The President of KCP Co. requested you to
explain the difference of net income between
variable costing income statement and
absorption costing method. You would say
that the difference:
A) Is none if the fixed costs in the
beginning and ending inventories in
both methods are equal.
B) Is equal to the fixed cost per unit
times the number of units sold.
C) Is attributable to the variable
manufacturing costs in the inventory
D) Is attributable to the fixed selling and
administrative costs in ending
inventory.
11. The primary benefit of using ABC is that it
provides
A) Better management decisions
B) Enhanced control over overhead costs
C) More cost pools
D) More accurate product costing
12. What is the proper order of these tasks
associated with an ABC system
1. Calculation of cost application rates
2. Identification of cost drivers
3. Assignment of cost to products
4. Identification of cost pools
A) 1234
B) 2413
C) 3421
D) 4213
13. Which of the following costs should not be
included in product costs for internal
management reports that are used for
decision-making?
A) Costs of unit-level activities.
B) Costs of batch-level activities.
C) Costs of product-level activities.
D) Costs of organization-sustaining
activities.
14. KCP Electronics manufactures a variety of
electronic gadgets for use in the home.
Which of the following would probably be the
most accurate measure of activity to use for
allocating the costs of inspecting the finished
products at Guerra?
A) Machine-hours
B) Direct labor-hours
C) Setting-up Time
D) Inspection time
15. Which of the following statements is false?
A) Under ABC, a product is allocated only
those costs that pertain to its
production, hence, the products are
not cross-subsidized
B) In ABC, the activities determined
serve as cost objects. Costs for each
activity are accumulated in a cost pool
and then allocated using the
appropriate activity base or cost
driver
C) If a firm manufactures only one
product, rather than multiple
products, ABC is more likely to result
in major differences from traditional
costing systems
D) ABC is useful for allocating production
costs, as well as marketing and
distribution costs
16. Designing a new product is an example of a:
A) Unit-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Facility-Level activity.
17. The plant manager's salary is an example of a:
A) Unit-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Facility-Level activity
18. Which system focuses on the management of
activities with the objective of improving the
 value received by customers and the profit C) P242,000
received by providing this value? D) P253,000
A) Activity based management
B) Traditional Cost Management 23. Dikolam Corporation’s 2019 manufacturing
C) Contemporary Cost System costs were as follows:
D) Standard Cost System Prime Cost P400,000

19. An event, action, transaction or unit of work Straight –Line depreciation 60,000
that consumes resources and with a specific of factory equipment
Straight –Line depreciation 40,000
purpose.
of factory building
A) Activity Janitors’ salaries for 12,000
B) Cost object cleaning factory premises
C) Cost driver Salesmen’s commission 20,000
D) Direct Labor based on sales
Straight line depreciation 15,000
20. Under both absorption and variable costing, for delivery van
variable overhead and variable operating
expenses; respectively, would be treated as a How much of these costs should be
product cost. inventoried for external reporting purposes?
A) Yes, Yes A) P512,000
B) Yes, No B) P400,000
C) No, no C) P547,000
D) No, Yes D) P412,000

21. Kings Company has provided information 24. Dimolam Corporation produced 10,000 units
concerning its projections for the coming year of Product A during the month of August.
as follows: Costs incurred during the month were as
Net Sales P10,000,000 follows:
Fixed Manufacturing Costs Direct Material Used P20,000
Direct Labor 16,000
P1,000,000
Variable Manufacturing 8,000
Kings projects variable manufacturing costs of
Overhead
60% of net sales. Assuming no change in Fixed Manufacturing 10,000
inventory, what will be the projected cost of Overhead
good sold be? Variable Selling and 2,400
A) P5,000,000 administrative expenses
B) P6,000,000 Fixed Selling and 9,000
C) P7,000,000 administrative expenses
Total P65,400
D) P8,000,000
What were Product A’s product cost per unit
22. Kings Company manufactures a single product
under absorption and variable costing?
using standard costing. Variable production
costs are P12 and fixed production costs are Absorption Costing Variable Costing
P125,000. Kings uses a normal activity of A) P6.54 P5.64
12,500 units to set its standard costs. Kings B) 4.40 5.40
began the year with 1,000 units in inventory, C) 3.60 4.64
produced 11,000 units, and sold 11,500 units. D) 5.40 4.40
The standard costs of goods sold under
absorption costing would be 25. Dinyalam Company produces a single product.
A) P115,000 Last Year, the company’s net operating
B) P132,000 income computed by the absorption costing
method was P36,000. The company’s unit
 product cost was P18 under variable costing Machine
and P22 under absorption costing. During the Assembling 200,000 hrs 50,000 hrs
period, inventory increased by 5,000 units. Products
The company’s income under variable costing Inspecting FG 12,000 hrs 8,000 hrs
Total Units 5,000 units 2,000 units
must have been:
Produced
A) P20,000
B) P56,000
Required:
C) P16,000
1. Allocate overhead costs using:
D) P41,000
a. Plantwide allocation
Increase in inventory 5,000 b. Department allocation
X Fixed Oh cost per unit (2-18) 5 c. ABC
Difference in income 2. Determine the unit product cost of Basic
20,000 Model and Deluxe Model assuming the
AC income following:
=36,000-20,000 Basic Model=DM: P1,000/ unit
=16,000 DL: P600/ unit
*Inventory increase, therefore production Deluxe Model: DM: P1,300/unit DL: P750/
was greater than sales, and absorption unit
costing income was greater than variable
costing income 27. Lamkuna Corporation has provided the
26. The following data are taken from the records following data from its activity-based costing
of HLG Company, a company that produces system:
two models of sailboat, the Basic Model and
the Deluxe Model. Activity Cost Total Cost Total
Pool Activity
Overhead Allocation Base
Assembly P313,490 29,000
Fabrication P3,000,000 60,000 machine
machine-hours
Department hrs
Processing P49,476 1,400 orders
Assembling 5,000,000 217,000 DLH
orders
Department
Inspection P73,882 1,060
inspection-
Total estimated DLH for the whole plant-250,000 DLH hours
ACTIVITY COST EST. OH EST. COST
DRIVER COSTS DRIVER The company makes 490 units of product B2 a
Purchasing Purchase 1,200,000 10,000
year, requiring a total of 1,080 machine-
materials Requisitions requisitions
Setting up Machine 1,600,000 2,000 hours, 60 orders, and 20 inspection-hours per
Machine Setups setups year. The product's direct material cost is
Running Machine 2,700,000 90,000 hrs P46.42 per unit and its direct labor cost is
Machine Hrs P20.22 per unit.
Assembling DL Hrs 1,500,000 250,000 hrs According to the activity-based costing
Products system, the average cost of product B2 is
Inspecting Inspection 1,000,000 20,000 hrs closest to:
FG Hrs
A) P97.63 per unit
B) P66.64 per unit
Allocation of cost driver activities are as follows:
C) P93.31 per unit
BASIC DELUXE
Purchasing 7,000 3,000 D) P94.79 per unit
materials requisition requisition
Setting up 1,100 setups 900 setups
Machine
Running 50,000 hrs 40,000 hrs