LAMITAN Company began operations on January 3, 19x3.

Standard costs were established in early

January assuming a normal production volume of 160,000 units. However, Samar produced only
140,000 units of product and sold 100,000 units at a selling price of P180 per unit during 19x3. Variable
costs totaled P7,000,000 of which 60% were manufacturing and 40% were selling. Fixed costs totaled
P11,200,000 of which 50% were manufacturing and 50% were selling. Samar had no raw materials or
work-in-process inventories at December 31, 19x3. Actual input prices per unit of product and actual
input quantities per unit of product were equal to standard. Samar’s cost of goods sold at standard cost
for 19x3 using full absorption costing is (M2**

) A. P6,500,000 C. P7,200,000 B. P7,000,000 D. P8,200,000

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. STU Company predicted that factory overhead for 2001 and 2002 would be P60,000 for each year. The
predicted and actual activity for 2001 and 2002 were 30,000 and 20,000 direct labor hours, respectivel

001 2002

Sales in units 25,000 25,000

Selling price per unit P10 P10

Direct materials and direct labor per unit

P5 P5

The company assumes that the long-run production level is 20,000 direct labor hours per year. The
actual factory overhead cost for the end of 2001 and 2002 was P60,000. Assume that it takes one direct
labor hour to make one finished unit. When the annual estimated factory overhead rate is used, the
gross profits for 2001 and 2002, respectively, are (D 75 and 55k?

Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first
month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed
costs are the same as the amount budgeted for the month. Other information for the
month includes:

Variable manufacturing costs $20.00 per unit

Variable marketing costs $ 3.00 per unit
Fixed manufacturing costs $ 7.00 per unit
Administrative expenses, all fixed $15.00 per unit
Ending inventories:
Direct materials -0-
WIP -0-
Finished goods 250 units

7) What is cost of goods sold per unit using variable costing?

A) $20
B) $23
C) $30
D) $45

Explanation: A) $20, only variable manufacturing costs are included when using variable
costing.

Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first
month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed
costs are the same as the amount budgeted for the month. Other information for the
month includes:

Variable manufacturing costs $20.00 per unit

Variable marketing costs $ 3.00 per unit
Fixed manufacturing costs $ 7.00 per unit
Administrative expenses, all fixed $15.00 per unit
Ending inventories:
Direct materials -0-
WIP -0-
Finished goods 250 units

8) What is cost of goods sold using variable costing?

A) $35,000
B) $40,000
C) $47,250
D) $54,000

Answer: A
Explanation: A) $20 × 1,750 units = $35,000

A manufacturing company employs variable costing for internal reporting and analysis purposes. However, it converts its records
to absorption costing for external reporting. The Accounting Department always reconciles the two operating income figures to
 assure that no errors have occurred in the conversion. The fixed manufacturing overhead cost per unit was based on the planned
level of production of 480,000 units. Financial data for the year are presented

below:   The difference between the operating

income calculated under the variable costing method and the operating income calculated under the absorption costing method
would be
A. $57,600
B. $60,000
C. $90,000
D. $120,000
正确答案：B
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 答案解析：
Answer (B) is correct . The difference between variable costing and absorption costing is that the former treats fixed
manufacturing overhead as a period cost. The latter method treats it as a product cost. Given that sales exceeded production, both
methods expense all fixed manufacturing overhead incurred during the year. However, 10,000 units (510,000 sales – 500,000
production) manufactured in a prior period were also sold. These units presumably were recorded at $10 under variable costing
and $16 under absorption costing. Consequently, absorption costing operating income is $60,000 (10,000 units × $6) less than
that under variable costing.

Answer (A) is incorrect because The amount of $57,600 equals 10,000 units times $5.76 per unit (total budgeted fixed
manufacturing overhead ¡Â 500,000 units).
Answer (C) is incorrect because The amount of $90,000 is the difference between planned sales (495,000 units) and actual sales
(510,000 units), times the fixed manufacturing overhead per unit ($6).
Answer (D) is incorrect because The amount of $120,000 is the volume variance under absorption costing.

Pungent Corporation manufactures and sells a spice rack. Shown below are the actual operating results for the
first two years of operations:
           
Year 1 Year 2
Units (spice racks) produced................................. 40,000 40,000
Units (spice racks) sold......................................... 37,000 41,000
Absorption costing net operating income............. $44,000 $52,000
Variable costing net operating income.................. $38,000 ???

            Pungent's cost structure and selling price were the same for both years. What is Pungent's variable
costing net operating income for Year 2?
            A)      $48,000
            B)      $50,000
            C)      $54,000
            D)      $56,000
           
            Ans:  C     Level:  Hard

            Solution:
          
Unit fixed manufacturing overhead = Difference in net income ÷ Change in inventory = ($44,000 –
$38,000) ÷ (40,000 – 37,000) = $6,000 ÷ 3,000 = $2
Variable costing net operating income = Absorption costing net income − Difference in net operating
income
= $52,000 − [(40,000 − 41,000) × $2)]
= $52,000 − ($2,000) = $54,000