Absorption and Variable Costing Fixed selling and administrative expenses 40,000

Fixed manufacturing overhead 60,000

1. During the month of May, Royal Co. produces 10,000 units of Product X. Costs incurred by
Royal during May were as follows: Last period, 13,000 units were produced. In the current period, 15,000 units were produced.
In each period, 13,000 units were sold. What is the difference in reported income under
Direct materials ₱10,000
absorption and variable costing for the current period?
Direct labor 20,000
Variable manufacturing overhead 5,000 a. Variable costing income exceeded absorption costing income by ₱4,000.
Variable selling and general 3,000 b. Absorption costing income exceeded variable costing income by ₱8,000.
Fixed manufacturing overhead 9,000 C. Variable costing income exceeded absorption costing income by ₱6,000.
Fixed selling and general 4,000 d. Net income will equal between the two methods.
Total ₱51,000
4. What factor related to manufacturing costs causes the difference in net earnings
What are the unit costs under absorption and variable costing methods, respectively? computed using absorption costing and net earnings computed using variable costing?

a. ₱5.10 ; ₱3.80 c. ₱4.40 ; ₱3.50 a. absorption costing considers all costs in the determination of net earnings,
b. ₱3.80 ; ₱5.10 d. ₱3.50 ; ₱4.40 whereas variable costing considers only direct costs.
b. absorption costing ‘inventories’ all direct costs, but variable costing considers
2. The following information pertains to Ralph Corporation:
direct costs to be period costs.
Beginning inventory NONE c. absorption costing ‘ inventories’ all fixed manufacturing costs for the period in
Ending inventory 5,000 units ending finished goods inventory, but variable costing expenses all fixed costs.
Direct labor per unit ₱10 d. absorption costing allocates fixed manufacturing costs between costs of goods
Direct materials per unit 8 sold and inventories, and variable costing considers all fixed costs to be period costs.
Variable overhead per unit 2
5. Aki Company makes a single product that sells for ₱1,000 each. Data for 2023 operations
Fixed overhead per unit 5
follow:
Variable selling costs per unit 6
Fixed selling costs per unit 8 Units: Variable costs:
Beginning inventory 5 Direct materials ₱18,000
What is the value of ending inventory under variable costing method and absorption costing
Production 60 Direct labor 12,000
method?
Ending inventory 15 Factory overhead 6,000
a. ₱155,000 ; ₱125,000 c. ₱100,000 ; ₱155,000 Selling and administrative 1,000
b. ₱125,000 ; ₱100,000 d. ₱195,000 ; ₱100,000 Fixed costs:
Factory overhead ₱15,000
3. Consider the following: Selling and administrative 2,000
Sales price, per unit ₱18 per unit 1. Determine inventory cost per unit under Absorption costing and Variable costing
Standard absorption cost rate 12 per unit 2. Determine the total cost of ending inventory under Absorption and Variable costing.
Standard variable cost rate 8 per unit 3. Prepare income statement under Absorption costing and Variable costing.
Variable selling expense rate 2 per unit 4. How much is the difference in profit between the two costing method?