Quiz 2 – Product Costing

6. How much is the unit product cost under absorption costing?

Name: Score:
Date: a) P 20.00
b) P 32.50
1. Which of the following is a product cost under absorption costing c) P 35.00
but not under variable costing? d) P 40.00

a) Variable marketing costs 7. If production is higher than sales, then absorption costing profit
b) Variable manufacturing costs is expected to be
c) Fixed marketing costs
d) Fixed manufacturing costs a) Lower than variable costing profit
b) Higher than variable costing profit
2. Under absorption costing, fixed manufacturing overhead costs are c) Equal to the variable costing profit
best described as d) Incomparable with variable costing profit

a) Direct period costs 8. Company A produced 10,000 units and sold 9,000 units. Fixed
b) Indirect period costs manufacturing overhead costs were P20,000, and variable
c) Direct product costs manufacturing overhead costs were P 3 per unit. Which of the
d) Indirect product costs following best describes the profit under the absorption costing
method?
3. Under variable costing,
a) P 2,000 less than profit under variable costing method
a) All period costs are fixed b) P 5,000 less than profit under variable costing method
b) All product costs are fixed c) P 2,000 more than profit under variable costing method
c) All period costs are variable d) P 5,000 more than profit under variable costing method
d) All product costs are variable
9. If ending inventory is higher than beginning inventory, then
4. As compared to absorption costing inventory cost, inventory cost absorption costing profit is expected to be
under variable costing is typically
a) Lower than variable costing profit
a) Lower b) Higher than variable costing profit
b) Higher c) Equal to the variable costing profit
c) The same d) Incomparable with variable costing profit
d) The same or lower in certain cases
10. Company B has an operating income of P50,000 under direct costing.
5. Items 5 to 6 are based on the following information: Beginning and ending inventories were 13,000 units and 18,000
units, respectively. If the fixed factory overhead application
White Company manufactures a single product. Unit variable rate is P2 per unit, then what is the operating income under the
production costs are P 20 and fixed production costs are P150,000. absorption costing?
White uses a normal activity of 10,000 units. White began the year
with no inventory, produced 12,000 units, and sold 7,500 units. a) P 70,000
b) P 60,000
How much is the unit product cost under variable costing? c) P 50,000
d) P 40,000
a) P 20.00
b) P 32.50
c) P 35.00
d) P 40.00
11. Company C had 16,000 units in its beginning inventory. The Answer:
company’s variable production costs were P6 per unit and its fixed
manufacturing overhead costs were P4 per unit. The company’s net 1._____
income for the year was P24,000 lower under absorption costing
than it was under variable costing. How many units does the 2._____
company have in its ending inventory?
3._____
a) 22,000 units
b) 10,000 units 4._____
c) 6,000 units
d) 4,000 units 5._____

12. Company D had a net income of P90,000 using variable costing and 6._____
net income of P85,500 using absorption costing. Total fixed
manufacturing overhead cost was P 150,000, and production was 7._____
100,000 units. How did the inventory level change during the year?
8._____
a) 3,000 units increase
b) 3,000 units decrease 9._____
c) 4,500 units increase
d) 4,500 units decrease 10._____

13. Under a just-in-time (JIT) production environment, profit under 11._____

absorption costing tends to be
12._____
a) Higher than that of variable costing
b) Lower than that of variable costing 13._____
c) Equal to that of variable costing
d) Not equal to that of variable costing 14._____

14. Variable costing profit fluctuates with (A) ____ and does not 15._____
react to changes in (B) ____.

a) (A) sales (B) production

b) (A) production (B) sales
c) (A) sales (B) demand
d) (A) production (B) supply

15. Variable costing is unacceptable for

a) Financial reporting
b) Transfer pricing
c) Cost-volume-profit analysis
d) Short-term decision making